Louisiana's Beach-Front Real Estate Devastated by Oil Spill

The phones at Carolyn Angelette's real estate office in Grand Isle, La., are ringing off the hook. But they aren't the kind of calls she wants.

Grand Isle is directly in the line of fire of what is being classified as the nation's worst oil spill ever, surpassing the Exxon Valdez disaster in 1989. Oil from BP's (BP) Deepwater Horizon oil platform that exploded about 40 miles offshore started washing up on the beaches of this resort community last week, but the smell of oil has been around for weeks.

"Are you kidding me, am I seeing any impact from the oil spill?" says Angelette. "I haven't put the phone down today."

Not surprisingly, the calls are from people calling her office to cancel their summer rentals or put their homes on the market. Not one of the calls is from anyone interested in buying the 100 or so homes she has listed. It's a full-blown real estate disaster that is affecting properties along the entire Gulf of Mexico.

Beautiful View -- Until You Smell the Crude

"We aren't selling a thing," she says. "I haven't had one closing since this whole thing happened."

Just this week, two closings fell through. Last year at this time, Angelette was averaging 25 closings each month, making her one of the top regional sales representatives for Century 21. Last week she had to let her receptionist go because she doesn't have any revenue, and may not for the foreseeable future.

"You should see it, today is so beautiful, the water is calm, and even the beach looks great," she says. "It's all ruined when you get a whiff of the crude."

Resorts Turned Into Distressed Properties

Efforts to stem the estimated 12,000 to 19,000 barrels pouring out each day from the leak, which started April 20, at the bottom of the ocean have so far been unsuccessful. The offshore oil-drilling rig explodedand sank, killing 11 workers, on April 22. The rig operator, BP, has been working with communities to clean the shorelines and boost business with limited success.

Rick Sharga, senior vice president at RealtyTrac, isn't surprised that the housing market along the Gulf Coast is starting to take a hit. He says the oil disaster is basically turning resort properties into distressed properties.

"It starts with the economy starting to suffer, and that works its way into jobs and then hits the housing market," Sharga says. "When the market does start picking up, homes will be offered at a severe discount."

Banks Don't Want to Foreclose on Homes

If there is a silver lining, it's that the banks are unlikely to start foreclosure proceedings on distressed homeowners since buyers will be scarce, according to Sharga. The same thing happened with Hurricane Katrina. The banks let people stay in their homes rather than have them sit vacant.

It's not quite that bad yet in Long Beach, Miss., since the oil still hasn't reached the shore. But the first waves of the impact are being felt, and realtor Gerald Savner is waiting for the other shoe to drop.

"It's coming, we can all feel it," Savner says. "Everything is slowing down in the business community, and real estate is next."