Grand Isle, LA
government estimates (Dec 2014: link no longer working, for information on the spill try here) the Deepwater Horizon oil spill has released between 41 and 120 million gallons of oil into the Gulf of Mexico since April. And oil is expected to continue leaking until the relief well is completed sometime in August. While oil continues to flow from the sea floor, the long-term consequences of the spill are still unknown.
But what will be the impact to area real estate? Short-term, area sales have all but dried up as buyers take a wait and see approach to their potential purchases. And longer-term, studies point to a drop in home prices for several years. According to one study (available to members for free via ProQuest) published in by the Appraisal Journal in 2001 on a much smaller spill in Maryland, area homes can expect to see a 10 percent decrease in value for beachfront property. A recent forecast report by CoStar Group comes to a similar conclusion, estimating the spill may cost the area up to $4.3 billion over the next three years in terms of depreciated land and home prices. Their best advice? Don’t panic, and if you can avoid it, don’t sell.
However, commercial real estate is driven much more by the area’s dependence on the broader oil industry. So far office and industrial users has seen little adverse impact from the spill. Vacationers who would have filled hotels and shopped in local retail stores have been replaced by the vast army of clean-up crews and officials in charge of containment. In fact, while some studies suggest residential prices will decrease as a result of the oil spill, NAI Global’s chief economist goes so far as to say the area’s commercial real estate should suffer no long-term impact, either positive or negative, as a result of the spill.
For more in-depth coverage on the spill and to read how local REALTORS® and local Associations are coping, be sure to take a look at Erica Christhoffer’s multi-part report in our sister blog, Speaking of Real Estate. She will also have an article in the August September issue of REALTOR® Magazine. For even more coverage, the New York Times has a great interactive feature on the spill with maps, video, reports and frequent updates.