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Gulf Oil spill could cost coastal homeowners up to $3 Billion in home values

Dennis Norman

Report looks at impact of the BP Deepwater Horizon Oil spill on Florida Coastal home values

According to a report released this morning by CoreLogic the impact of the BP DeepWater Horizon oil spill on home values in the coastal area’s along the Gulf coast is expected to range from $648 million over one year to as much as $3 billion over five years. This estimate is for the communities that are already impacted by the spill, if the unlikely worst-case scenario occurs and the spill reaches down to the area of the Florida Keys and up the Florida Atlantic coast then additional losses could reach up to $28 billion over five years according to the report.

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.

 

Core Logi Gulf Oil Spill Impact on Coastal Communities

Source: CoreLogic

The CoreLogic analysis relies on established methods for estimating environmental amenity values in general that take into account the annualized economic value of beach access in these coastal communities at risk of being damaged by oil coming ashore and beaches being closed to human recreational use for a period of five years. Buyers of homes in these coastal communities paid premiums when they purchased their homes for access to the beaches and the amenity benefits that they represent.

corelogic Gulf Oil Spill Chart showing impact on property valuesResult Highlights

  • The loss in amenity value is measured as the annuity value of the perpetuity value of access to the beach, measured in distance, for five years because of the environmental impact of the oil spill.
  • The loss in amenity value increases for properties closer to the beach. Figure 1 shows the loss in amenity value as a function of distance, measured in meters to the beachfront. Beachfront 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).
  • In terms of average loss in amenity value per home, Gulfport ($56,000) is the largest, followed by Mobile ($45,000) and Pensacola ($40,000).
  • If the Gulf currents take the oil to the communities along the Florida gulf coast the loss in amenity value will rise substantially. The four coastal communities along the coast (Panama City, Tampa Bay, Cape Coral, Naples) could experience a total loss in amenity value of $11 billion impacting 238,000 homes.
  • Even though the chances are low, CoreLogic estimated the loss in amenity value for communities along the Atlantic coast of Florida as well. This includes Miami, Key West, Palm Bay, Daytona Beach, and Jacksonville. More than 295,000 properties within 1,000 meters of the beach could be affected with a total loss in amenity value of $13.5 billion.

“Using well established economic techniques for the measurement of the economic value of environmental amenities an estimate of the loss in beach amenity value is substantial. 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.

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