Gulf Oil spill and Bay Area property values
Although both seem remotely connected with each other, the BP’s Gulf oil spill – presently affecting only dolphins, birds and other animals so far – is creating a scare among the real estate business people, in that it will affect the property values of those cities having seashore – including San Francisco Bay Area.
Trulia.com is reportedly tracking the impact of the oil-spill disaster on property values in SF Bay area. Although the extent of damage is yet to be assessed from the Gulf real estate markets – some of them are non-disclosure states where no public record of sale prices are available – it is projected that trouble is brewing in the housing markets. Basically the damage is already caused, by the apprehension over the desirability of location – which is predominant factor for real estate business.
So far the impact is much visible on the rental properties, in areas consisting second homes and vacation rentals by the cancelation of plans by many vacation renters booked for this summer. It is ironical that cleanup crews of the spilled oil are renting these units now.
As regards homes for sale – although there is no actual damage reported to the homes from anywhere – the psychological fear works fast. Industry experts compare the present situation to the 1989 Loma Prieta earthquake. At that time, the actual property damage was nearly $6 billion, but the lingering perception in the minds of people as a less-desirable location, caused more damage by the reduced home values, running into millions of dollars.
But the trouble as of now is – no one is able to predict the damage that the present disaster could instill, by way of oily beaches and allied troubles making the seashores as places to keep away from. Already a number of real estate brokers and agents in the Gulf area are reported to have complained about cancellation of many purchase contracts. For example, one of the agents says she went from closing 25 business transactions per month to zero.
The damage to property values; cancellation of rental and buying contracts apart there is one more likely damage to the local economy though. Because of the devastation of oil spill, fishing and other local industries connected with the sea might suffer, affecting the financial ability of local home owners in meeting their mortgage commitments.
Posted by Amitesh Kumar
on Jul 5 2010. Filed under Housing.
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