The Oil Spill and the Housing Economic Impact to the Region
By now, anyone who hasn’t been paying much attention to the national news will find this article a bit over their heads. Of course, it is assumed that in fact anyone and everyone who is involved in the real estate market at some level, be it mortgage brokers to agents or anyone in between, knows about what has happened in the Gulf of Mexico and the cleanup efforts that have led to many financial burdens for the people of the Gulf Coast region.
Fishing ships in some locales and vacation regions have endured an enormous economic burden from this disaster and while it may not make lead headlines every night on the news any longer, it doesn’t mean that the issue is resolved. In fact, the stress on the communities that have been most impacted continues to mount. Now the next victim is expected to be the housing industry of homes that are directly affected by the oil spill.
71,000 homes could be affected
The estimates are only just now being put together and the numbers are staggering. More than 71,000 homes along the Panhandle of Florida, Alabama, and Mississippi can expect their value to drop as a result of the oil spill. An incredible number of homes and there is, as of yet, no plan in place or any indication from BP or its affiliates to compensate these homeowners for their lost assets, if it comes to pass.
The total estimates at this point for the value that could be lost as a result of this oil spill is approximately $3 billion. When you calculate the number of projected homes being affected and that total tab, the average homeowner in these regions along the water could expect their average home price to suffer to the tune of just over $42,000.
Any relief in site?
While there are efforts in place to help cleanup to Gulf Coast and all of the affected regions, there has been no indication that any of these homeowners will receive any monetary compensation. Of course, there is a major dilemma involved in this issue. It isn’t that the government is negligent in its addressing -or, more appropriately, not addressing- home values in the affect Gulf region, but that there are many unanswered, and unanswerable questions at present.
The first is whether or not any of these homeowners would be willing or looking to sell within the next year or two. If so, then they would in fact be directly affected by the oil spill as their home value will be greatly depreciated. Another question would be how to determine the true effect of the Gulf oil spill on home values over a period of time. For example, if a period of time is determined as five years, wouldn’t it stand to reason that twenty years would balance out the damage done, and that these homes would then recoup whatever lost revenue or value that they currently experience? If that is the case, then should there be an escrow system set up for homeowners so that they can tap into it should they decide that it’s time for them to sell and leave the region?
The disaster in the Gulf is an unprecedented naturally and economic disaster with many economic repercussions that may not be felt yet, and may not be felt for years to come. A second factor that is important to consider is that a driving force in the depreciation of home values is the buyer and after any disaster, whether it’s a hurricane or this oil spill, buyers will be determined to undervalue homes, anyway. The psychology of this phenomena isn’t easily predictable and the best bet for homeowners in these regions is to state that if they don’t need to sell at this time, it would be best advisable to hold onto their property until the teeth of this disaster have become a bit duller.