Economic Analysts Find Oil Spill Tanks Local Housing and Will Cost Thousands of Jobs
The temporary cap on the Deepwater Horizon oil rig may be preventing more oil from filling the Gulf of Mexico, but mortgage analysts are only now getting a measure on the permanent damage to the housing market and local economies. And like the oil spill itself, opinions on this matter remain all over the place. All agree that the BP oil spill changed the landscape tremendously, but how it is doing so is being argued in different ways. For instance, sources differ on whether the real villain here is BP or the US government moratorium on off shore drilling and oil exploration in the Gulf. While the clean-up effort will provide temporary jobs, permanent job loses are likely to be above 8,000. There's an obvious correlation between the housing market and the job market. When people don't have jobs, they can't afford their homes. For this reason, Lisa Marquis Jackson, vice president of John Burns Real Estate Consulting, believes that the impact of the BP oil spill will not effect the housing and homebuilding industry on a national scale. She said that only local Metropolitan Statistical Areas (MSAs) will feel the burn, Houston being the most prominent. The short-term and direct impact on Houston's housing market, states Jackson, is devastating; the average net sales for new home communities is already down 17.5% from June to July, traffic is slowing and the number of closings is dropping. On top of this, many commercial real estate establishments are suffering. Funding for the NASA shuttle program has been cancelled and the city is headquarters for a large section of the world oil and gas industry, which is constantly being mandated by the government. Jackson believes that a massive layoff is somewhere in the near future for Houston, but it's not to be feared; this will not lead to long-term despair. She says that the clean up from the oil spill alone will create wave of new jobs and invite an aggressive business environment that will stimulate the housing industry and make housing affordable. "In other words, oil won't be to Houston what auto was to Detroit" said Jackson. "Instead, picture the carnival game 'Whack-a-Mole' where heads continue to pop up in new areas-even after they've been beaten down." Her theory is not shared by others. International commentator Joseph Mason is looking at the bigger picture. In his recently released study, "The Economic Cost of a Moratorium on Offshore Oil and Gas Exploration to the Gulf Region," he argues that a hold on offshore drilling could potentially lead to a job deficiency that could stretch nationwide and cost the U.S. billions of dollars. In this study he predicts the consequences of a six month moratorium on offshore oil and gas drilling (a conservative time slot by his standards): approximately $2.1bn loss in product output, depletion of 8,169 jobs, calculated loss of over $487mn in employee wages, and almost $98mn forfeited in tax revenues. And that's for just the Gulf region alone. Mason explains the "spill-over" of these deficiencies into other states as even more national loss. "[A]lthough a significant portion of oil and natural gas production is localized in the Gulf, the U.S. is a fully integrated economy, so the losses can reasonably be expected to 'spill-over' into other states," Mason said in his report. "As a result of this spillover effect, there could be an additional loss of $0.6bn in output, 3,877 jobs, and $219m in potential wages nationwide. Moreover, the Federal government stands to lose $219m in tax revenue." Without those funds, especially employee and in consequence consumer wages, the housing industry will undoubtedly suffer. And even people outside the Gulf region, although not directly effected by the BP oil spill, will, according to Mason, soon be able to feel the repercussions. Write to Christine Ricciardi.