US Gulf coast property was already struggling before the BP oil spill, and now the earlier declines have been exacerbated. Recovery will depend on restoring faith in the region and in the oil cleanup, but a rebound will be challenging for states like Florida, who are suffering from massive amounts of underwater mortgages. See the following article from Property Wire for more on this.
Sales of residential property in some locations along the US Gulf coast have stalled because of the BP oil spill and some homes have been damaged, it is claimed.
One in four real estate professionals say that property sales have come to a halt and more than half believe that the spill is having a negative impact, according to a survey by the analytics firm Clear Capital.
They say that the man made catastrophe has resulted in a 5 to 15% drop in prices and more than 3% of respondents reported actual property damage from the spill.
In Mobile, Alabama, property sales dropped 25% in June from last year and other areas in southeastern Alabama and Florida reported decreased sales and property values because of the spill. In Panama City, Florida, professionals reported a 32.5% drop in sales volume from a year ago.
‘The results of our survey reflect the overall uncertainty of where and by how much the oil spill is affecting individual local markets,’ said Alex Villacorta, senior statistician at Clear Capital. ‘While social stigma appears to be the largest factor influencing the slowdown in home buying activity, it is clear the effects of the spill are being felt well inland from the coast,’ he added.
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While the oil spill cannot be blamed alone for the drop off as many of the local markets were already experiencing price declines anyway, the environmental disaster has added to the declines and will probably push back a real estate market recovery.
‘Many of these local markets in the Gulf have already experienced significant price declines over the last few years as well as a recent drop off in sales volume after the tax credit expiration. Additional downward pressure in the form of stigma and loss of employment will only serve to further dampen home price recovery,’ said Villacorta.
Markets inland from the coast that support the oil and seafood industries, including the greater New Orleans and Houston markets, also reported a slowdown in real estate activity, with real estate professionals attributing the slowdown to rising unemployment connected with the spill.
Sales in the greater New Orleans market were down 12.7% in May compared to the same time a year ago, and down 37.9% in June.
The spill’s impact on home values in 15 coastal counties along the Gulf of Mexico could reach $3 billion over five years, according to a report published last month by property data aggregator CoreLogic.
Clear Capital’s study also found that public perception and uncertainty over the oil spill’s long term impacts is seen as a factor to contend with in markets not directly impacted by the spill. Real estate agents in St. Petersburg, Florida said that the water and beaches may now be clean but it is the stigma of the spill that is having a negative impact on home sales.
In Naples, Florida, one real estate office that usually receives five out of state customer inquiries per week was receiving only one call every other week after the spill occurred, the report said.
A key to recovery will be the nature of public sentiment regarding the spill. ‘If the public gains confidence in the cleanup and capping efforts, and if drilling moratoriums are lifted, the renewed confidence could lead to a surge in home buying activity, the Clear Capital report concludes.
But property prices could fall 10% along the 569 mile coastline, according to a report from real estate analysts CoStar Group. And others believe that Florida is the state that is the least able to bounce back from the decline. According to a Fitch Ratings report, Florida already ranks the worst among all states in mortgage delinquencies across all product types. Further economic stress brought on by the oil spill and declines in the tourism and fishing industries are likely to increase default rates.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.