Environmentalists are not the only individuals up in arms regarding the negative impact of the Deepwater Horizon oil spill. Thanks to an oil rig explosion and a continuous three month flow of oil into the Gulf of Mexico, local home values in Louisiana , Mississippi, Alabama and parts of Florida are expected to drop another 30 percent. Those retractions will be in addition to a shaky real estate market first impacted by the havoc caused by Hurricane Katrina and then the mortgage meltdown crisis spanning the country.
What Is the Deepwater Horizon Oil Spill?
Despite the environmental risks, energy czars have always considered offshore drilling to be a viable option for extracting fossil fuel. The Deepwater Horizon rig was no exception to the rule and for around nine years, the drill operated a mere 42 miles from the Louisiana coast. This particular rig could operate in waters that were up to 8,000 feet deep and drill down to an astonishing depth of 30,000 feet. Transocean, the world's largest offshore drilling contractor owned the device and the Deepwater Horizon rig was leased by British Petroleum (BP) from March 2008 to September 2013.
On April 20, 2010 the rig exploded courtesy of a high pressure methane gas build up. The fumes raced through the drill column, engulfed the platform, ignited and exploded. The tragedy has thought to have taken the lives of eleven rig workers, although their bodies have never been found. After the explosion a large oil slick started to cover the former rig site and on April 22, it was discovered that an oil leak was occuring. After the initial sighting, millions of gallons of oil flowed from the exposed well and the process continued for a full three months.
During that time an uncountable amount of oil leaked from the earths core and affected the area by coating beaches, killing marine life and subsequent fishing industries with it. Unfortunately, the disaster has earned the unfortunate title of being the largest accidental marine oil spill in the history of the petroleum industry. Oil still clings to the seaboard and coastal regions and marshes experience residue wash up on a daily basis. This disaster has negatively impacted BP to the tune of $3.12 billion in related expenses and according to global financial services company USB, the total losses are expected to reach the $12 billion mark, real estate values withstand.
Real Estate Values In Relation to BP Oil Spill
In direct correlation to the oil rig disaster, Gulf Coast towns already on the economic edge were forced into a full-blown recession thanks to the decrease in home values. Real estate data provider CoreLogic, has estimated that the BP Oil Rig disaster can decrease property values by $68 million over the next year. Over the next five years, it is expected that the real estate value decreases may reach up to $3 billion.
CoreLogic analyzed home values in Florida's Panhandle region, and Alabama, and Mississippi,according to their findings beachfront properties, known for needing jumbo mortgages are expected to suffer the brunt of price reductions. CNNMoney.com reported that Mississippi homes have been hit with a $56,000 price reduction while Florida properties have lost about $40,000. The data reveals that $1.6 billion in home value will be lost in Pensacola while Gulfport, Mississippi properties are expected to lose $1.2 billion.
It is important to note that it is too early to fully analyze the financial impact of the oil rig disaster. At this point CoreLogic compared the price differences of nearly identical beachfront and nearby neighborhood homes and weighed the home-valuation calculations including price premiums for waterfront adjacency.
Within the Louisiana real estate market, local real estate brokers have reported that the current real estate market has come to a screeching halt, courtesy of the environment disaster. Some local real estate agents have sited that borrowers have backed out of sales transactions. Commercial real estate information, marketing and analytic services company CoStar Group Inc. have guessed that including the Louisiana numbers, the oil spill may deliver a whopping $4.6 billion blow to real estate market values.
Lenders Offering Salvation
While banks have recently gotten a bad rap for their behavior during the mortgage meltdown and subsequent foreclosure scandals, financial institutions are bending over backwards to assist local homeowners currently in need. According to RealtyTrac Senior VP Rick Sharga, since the local markets are at a stand still lenders are providing affected homeowners with breathing room by lightening demands in regards to monthly payment schedules.
If you are a borrower negatively impacted by the tragedy and have yet to receive a break from your lender, then contacting your loan provider and asking for mortgage forbearance is in order. Mortgage forbearance is when a the mortgage lender and the delinquent borrower negotiate terms preventing the lender from exercising their legal rights to foreclose. All situations will be reviewed on a case to case basis.