Gulf Oil Spill Real Estate: BP's Payments to Victims May Not Be Enough
Real estate experts claim the oil spill has created a 30 percent value decline to Gulf Coast real estate properties -- in an area that was already hurting but was starting to see a glimmer of hope from the housing recession.
CNN reported that at least 446 claims for loss of rental income have been filed in Florida, and $75,727 has been paid out to more property owners for real estate loss values. (Warning: those BP payments might be considered taxable income.)
But now some owners of beach properties wonder if their values will ever recover. HousingWatch talked to a few Gulf residents and real estate professionals who have been afffected:
It was the hottest deal ever, or so said her salivating real estate agent. Journalist Allison Hatfield of Dallas bought a home on Alabama's Gulf Shores in August 2007. Asking price: $160,000. Daringly, she offered $150,000 and thought she was insulting the neighbors. But the developer caved, and Hatfield ended up owning her own little patch of white quartz sand paradise on the Gulf Coast. For a while, the beachfront townhouse in Lakewood Villas was her only home and a wonderful escape from Dallas and New York.
Today, Hatfield is not so sure about her investment. As for the "deal" she got, a similar townhome in the same development is currently listed for sale for $69,900. Same age, fresh paint. That means, says Hatfield, her beach home is now worth almost one-half less than she paid for it. She owes $147,000 on that zero-down-payment mortgage and she makes her payments like clockwork.
"But if I lose my job," she says, "I'm in trouble."
Like many of us, Hatfield got caught in the real estate finance fever of 2007. An Alabama native, she loves the crystal white sugar-sand beaches on this coast and was lured by the wave of development that hit this area after Hurricane Ivan in 2004. Shortly after she bought the beach house in Alabama, she moved back to Dallas and bought a home in Uptown, just north of downtown. Now Hatfield owns two homes, one of which is worth less than what she paid.
Alabama has 26 miles of "white sugar" quartz sand beaches, and the upscale city of Orange Beach is said to have even whiter sands than Florida's popular Destin by far. The area is known as the "Redneck Rivera." St. Louis-resident Amanda Tackett visits often, since her mother-in-law lives on Ono Island (so named because that's what Floridians allegedly said when they discovered they had given such a pristine paradise away to a neighboring state). Tackett was one of the first 40 residents on the island. She and her husband bought their four-bedroom beach house in 1987 to do some serious deep-sea fishing, paying about $200,000.
Now there are more than 4,000 residents on Ono, and dozens of homes once priced for upward of $3 million.
"This place was unrecognizable after Ivan," says Amanda Tackett. Gulf Shores took the brunt of Ivan's Category 3 status and was pummeled by 120 mile per hour winds. After Ivan demolished it, says Tackett, the developers came in and built like crazy just as the rest of the nation was going house-nuts. By 2007, Gulf Shores, Orange Beach and Dauphin Island real estate were on fire.
Then came the recession: $5-million homes going for a fraction in short sales, home auctions that barely move inventory.
"There was a huge real estate auction here a few weeks ago," says Hatfield. "Only 10 sold, and for way less than asking."
Which may sound like a great deal to buyers pouncing on beachfront property at its lowest. But Allison says the costs don't stop with ownership. Her property insurance is so high that she has to buy through a state pool. She can afford her condo, but not the insurance to cover it. They had major real estate issues here before the oil spill even happened, says Hatfield. The problem with the oil spill is the overall harm to the tourist industry -- the empty restaurants and canceled condo leases.
Of all the states whose beaches will be most damaged by the spill, experts say that Florida and Alabama will suffer the most. According to Property Wire, developers in these states say they sell a certain lifestyle that doesn't necessarily mesh with oil-soiled beaches. These states are also vacation central: Vacation rental bookings at Meyer Real Estate were brisk on the coast of Alabama and northwest Florida before the spill, up 20 percent over 2009. But the company has seen about a 15 percent drop in cancellations since late April and bookings are down 60 percent, according to Inman News.
Tourists may be hesitant for now, but Sims tells me that buyers are burning the phone lines, wanting bargains. She says BP has "thousands" of cleanup crews on the Alabama beaches 24/7, removing any tar balls or mess that washes ashore, first thing in the morning. It's kind of like a restaurant with amazing service, she says, where as soon as you set your fork down on the table, they whisk it off. But buyers who are looking now are savvy number-crunchers: They are driven by low price, not emotion.
Allison Hatfield, though, is still driven by emotion. On a good day, she says, she's happy to have a beach house and looks at it as a forced savings for something that she still hopes is going to be a solid investment in her future. But on a bad day, she feels trapped and angry, like she can never get out and wonders if the Gulf oil spill will confine her.
"Sometimes I'd really like an extra $1,600 per month," she says, "instead of a beach house."
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