Oil Spill Impacts Housing Market in Areas Beyond the Gulf

Results from Gulf Coast Oil Spill Impact survey show that the negative effect of the BP oil spill on the housing market is hitting areas beyond the Gulf coastal region.

Conducted by Clear Capitol, the results show that nearly one out of every four real estate professionals report the oil spill has had a negative effect in the local real estate market.  Even in markets that remain undamaged by the oil, the number of home sales has dropped dramatically year-over-year.

“The results of our survey reflect the overall uncertainty of where and by how much the oil spill is affecting individual local markets,” said Dr. Alex Villacorta, Senior Statistician, 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.”

Clear Capitol, a company that provides data and solutions for real estate asset valuation, investment, and risk assessment, surveyed real estate brokers, agents and appraisers based on the markets they work and live in according to zip code.

Survey results show more than 50 percent of the poll’s respondents reported a five to 15 percent decrease in home values in their area, and 23.8 percent felt the oil spill had a negative effect on their markets. The southern coastal region of Alabama and the Florida panhandle were affected the most by physical property damage from the spill. In Mobile, Alabama, the number of home sales fell 25 percent this June compared to last year’s numbers. However, many more inland areas are reporting at least five to 15 percent decrease in property value and 3.2 percent reported actual physical property damage due to the spill.

Social stigma, defined by Clear Capitol as “the belief that an area has been negatively affected because of its proximity to the Gulf,” can be attributed to much of the polls’ results. In St. Petersburg, Florida, the ocean water and its beaches are clean and the oil is hundreds of miles away, meaning the area is highly unlikely to encounter any physical damage. However, real estate professionals from the region are reporting that the spill is having a negative effect on home sales. Before the oil spill, home sales in the area were considered “very positive,” gradually increasing since last year.

This April, home sales increased in St. Petersburg by 18.3 percent compared to last April. In May, home sales increased in St. Petersburg by 16.8 percent compared to May 2009. But by June, home sales increased by only 8.8 percent since June 2009.

Many people, at 41.4 percent, in unaffected areas feel “unsure what the future holds” according to the poll. And 15.3 percent of these people are predicting a drop in home prices in their area. Clear Capitol suggests that public confidence in capping and cleaning the oil spill will restore confidence in the housing market and fuel more sales. However, the opposite effect is possible as well.

To read the entire report, see here.

Written by Kelly Mellott

Reminder: The industry is doing our part to help rebuild New Orleans before the NRMLA Annual Conference on Nov. 2nd.  To learn more, see here.

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