Steadfast FinancesCould BP Oil Spill Cause a Double Dip in Beachfront Real Estate?

Could Beachfront Real Estate Decrease in Value After BP Oil Spill?

Filed in Real Estate 4 comments

Not that real estate prices in areas of the southeastern U.S., like Miami, FL, and Myrtle Beach, SC, need another hit after the real estate bubble popped, but recent projections from the National Center for Atmospheric Research (NCAR) of oil getting caught in the Gulf of Mexico loop current couldn’t get more dire.

I routinely tease my real estate investor friends that beachfront property is a bad investment on a 1000 year time line because of rising ocean levels (yes, I know it’s a bad joke), but my facetious teasing went from dinner party conversation to a possible reality after viewing NCAR’s BP oil spill scenario.

As the NCAR video states, it’s just one projection, not a certainty, but if BP can’t shut down the leak and knowing that a relief well will take several weeks to become operational, the model shifts from theoretical projections to a plausible outcome pretty quick.

Therefore, if you’re a beachfront business owner dependent upon tourist and vacationer dollars, just imagine what that is going to do to your monthly cash flow during peak season. Not to mention, the value of your investment when your beachfront real estate, and miles upon miles of beaches to the north and south of you, just got slathered in crude oil.

Worse yet, crude oil from the Exxon Valdez oil spill is still easily found on the Alaskan shores 21 years after the spill, so if oil from the BP oil spill hits the southeastern U.S., don’t look for it to vanish from the beaches quickly. Or cheaply for that matter.

Which begs the forward thinking financial question…

Could real estate along the southeastern U.S. take another hit because of the BP oil spill?

It’s only natural to say it won’t — especially if you’re already a property owner in this area — but that doesn’t mean it won’t happen.

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Posted by CJ   @   3 June 2010 4 comments
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4 Comments

Comments
Jun 4, 2010
2:13 pm

Great questions, Matt. We’re already seeing the economies of beach communities in the Gulf Coast get nailed, which will certainly have a negative downward effect on property values, at least in the short term, I presume. Would you want to live on a shoreline caked in oil along with dead birds, fish, and other animals? Lets just hope they can stop this thing!

Jun 6, 2010
5:40 pm
#2 Matt SF :

Thanks for the info Josh, as frightening as it is. I certainly wouldn’t want to live in an environment as you describe, but that might be a very real possibility in the coming weeks. The vulture investor in me keeps wanting to jump back in (especially at 4.5% interest rates), but the macro picture keeps me from pulling the trigger.

Personally, I’ll be interested in how BP’s legal team deals with losses to businesses that are “across the street” from the beach. A hotel can probably successfully litigate that oil spoiled there beachfront property, and therefore, reduced their seasonal tourist income.

But what about the hotel across the street? The restaurant one mile inland? The surf shop at the mall? That might be the last straw that broke the proverbial camel’s back.

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