Research Warns Spill Damage to Gulf Homes Could Reach $28 Billion

August 3, 2010

The British Petroleum, DeepWater Horizon oil spill may result in a loss in home value in Gulf coast communities of $648 million over one year, according to a new report from CoreLogic, a provider of information, analytics and business services.

The report also says home devaluation could be as $3 billion over five years for the communities already being impacted by the spill, and if the unlikely worst-case scenario occurs and the spill reaches around the Florida Keys and up the Atlantic coast of Florida impacting beach amenities, the additional losses could reach up to $28 billion over five years.

In the coastal counties of Harrison, Mobile, and Escambia, there are more than 71,000 homes that will potentially be impacted. In addition, there are 15 major counties stretching from the Gulf coast of Mississippi to the Atlantic coast of Florida with more than 600,000 residential properties within 1,000 meters of the coastline.

The analysis takes into account the idea that many of the people who live in these homes bought them specifically so they could have access to the beach, and paid a premium for that access, and that the oil may damage the beaches and lead to their closure for a number of years.

A U.S. government team of scientists recently estimated that a total of 4.9 million barrels of oil poured out of the Macondo oil reservior before the damaged well was capped on July 15. Scientists have also noted that nature appears to be degrading and dissipating the oil faster than would have been expected.

The report estimates the losses could be greatest for beachfront homes. Those homes could incur a loss of amenity valued as high as $80,000.

The highest risk coastal communities along the Mississippi, Alabama, and Florida panhandle include more than 71,000 residential homes at risk of losing an estimated average loss in beach amenities valued between $40,000 and $56,000. The total estimated loss of beach amenities is valued at $3 billion.

Of the immediately impacted communities, the largest overall loss in amenity value would be in Pensacola ($1.6 billion), followed by Gulfport ($1.2 billion).

“While it is by no means a certainty that the major coastal communities along both coasts of Florida will be impacted at all by the oil spill, the lost amenity value in these markets could be particularly high,” said Mark Fleming, chief economist with CoreLogic, in a press statement. “The total loss in amenity value in communities already being impacted by the oil spill to date is potentially as high as $3 billion over five years. Our hope is that the oil spill is contained and the loss in amenity value is further moderated by a speedy cleanup and a return of beach amenities to the affected communities’ homeowners.”

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