COLUMN: Beachfront home values will take a smaller hit than expected

Gulf Coast homes and condos on the immediate coastline in the path of the BP oil spill in Alabama and Florida will suffer only a 10 percent drop in average values as a result of the oil disaster, according to a new Housing Predictor forecast compiled after more than three months of research.

The impact of the disaster has already taken a toll on Louisiana and Mississippi coastal properties, gaining momentum as real estate brokers and agents close few sales due to the oil spill. Coastal properties in Louisiana and Mississippi are projected to sustain a 20 percent loss in average values as a result of the spill, down-graded from the 30 percent initially forecast.

The 10 percent deflation in housing values along Florida and Alabama’s coastlines is less than what many real estate economists feared would develop as a result of the spill.

The losses in home and condo values for the region are projected to be sustained over a two year period as buyers shy away from the area because of the fallout from the environmental catastrophe, the worst in U.S. history. Real estate agents all along the Gulf Coast, from Louisiana through the Florida Panhandle, are reporting little sales activity as buyers await the outcome of the crisis.

The disaster poses a series of problems for the Gulf Coast region, including the loss of millions of jobs after a decline in tourism. Hotel and condo reservations are down more than two-thirds along the popular Alabama coastline, where oil has stained the beaches in Gulf Shores. This adds to the public relations nightmare for real estate sales people.

The crisis is impacting every sector of the real estate market, including banks, title companies, real estate brokers and rental agents, who are all typically paid on commission.

Florida and Alabama have started aggressive TV advertising campaigns to counter the negative media coverage over the crisis at the height of the tourism season. The annual $60-billion Florida tourism business hangs in the balance. An estimated $14 billion of the state’s tourism business is counted in receipts that are spent near Florida’s Panhandle beaches.

The oil has mainly been kept offshore by seasonal gulf winds blowing the massive spill toward Louisiana and western Mississippi. Only globs of oil or tar balls have washed ashore in Florida.

Florida housing values, troubled by high unemployment and record foreclosure rates, were on a slow but steady route to recovery.

But as a result of the spill and its uncertainty, buyers have become reluctant to look at property. The fears also include questions over the use of the dispersants that BP has used to break up the oil and its long-term health effects.

Nearly 60 percent of Florida properties with a mortgage are in default as an increasing number of condominium and vacation homeowners run into trouble making mortgage payments as a result of losing weekly rental income due to the spill.

Freddie Mac, one of the nation’s two giant mortgage lenders, Bank of America and Wells Fargo Bank are granting mortgage borrowers in the region relief. Freddie Mac is allowing its servicers to suspend a borrower’s mortgage payments for up to 12 months.

Mike Colpitts is the editor of housingpredictor.com, a Santa Rosa Beach-based company that forecasts housing markets in all 50 states.