The BP Deepwater Horizon oil spill is expected to have a grave--and costly--impact on coastal area real estate.[IMAGE]
According to a recent report by ""CoreLogic"":http://www.corelogic.com/, a Santa Ana, California-based provider of information, analytics, and businesses services, the impact of the spill on home values in coastal communities already affected by the spill is expected to range from $648 million over one year to as much as $3 billion over five years. And in the event that the unlikely, worst-case scenario occurs and the spill reaches around the Florida Keys and up the Atlantic coast of Florida, the additional losses could reach up to $28 billion over five years, CoreLogic said.
The company said its analysis relied 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[COLUMN_BREAK]
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 explained.
In total, there are 15 major beach communities 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, CoreLogic said. Of the immediately impacted communities, the largest overall loss in amenity value over the next five years is expected to be in Pensacola ($1.6 billion), followed by Gulfport ($1.2 billion).
In this study, the duration of impact was assumed to be five years, but the methodology estimated an annualized economic value. Therefore, the five-year estimate is merely five times the annualized economic value of a single year, CoreLogic said. The company noted that the potential loss in amenity value may be moderated by a speedy cleanup and return of beach amenities to these communities.
But this moderation may not come anytime soon, as more oil has gushed into the ocean than originally thought. According to a breaking update released Monday by government scientists responsible for estimating the flow rate of the oil, the blown-out well is now responsible for an astounding 4.9 million barrels, or 205.8 million gallons, of oil leakage.