As floating globs of oil begin to come ashore on the barrier islands off the coast of Louisiana, real estate agents and homeowners along the Gulf Coast are bracing for a potential and perhaps devastating drop in property values.
Already some owners are seeing cancellations stemming from the uncertainty around the size and scope of the oil's impact, and hurricane-hardened residents inevitably were raising comparisons to devastating storms of the past.
In Gulf Shores, Ala., property owner and manager Greg Miller said that while he weathered hurricanes Camille and Katrina, the damage from those two monster storms "pales" in comparison to the beating his business has been taking since an underwater gusher was unleashed by the April 20 rig accident in the Gulf.
On Monday alone, he lost more than $70,000 in summer rentals as vacationers called to cancel planned one-to-two-week stays at his luxury, beachfront homes that were scheduled for as far out as September, he said. Miller, owner of Fort Morgan Realty and Development Inc., estimates the oil catastrophe may cost him $300,000 to $400,000 in business. And, so far, his insurance carriers are telling him they won’t cover his diminished revenue.
“I’ve been on this peninsula my entire life,” Miller said. “Hurricanes are part of life here. You accept that. You learn how to deal with them. You’ve got a storm coming in, you board up and get sand. Afterward, you’re out trying to repair things and get back in business. This is something out of our control. What do you do? I almost feel like a condemned man sitting in prison waiting for the sentence to be imposed.”
Miller has joined one of the more than 30 lawsuits filed against BP Plc and Transocean Ltd. on behalf of commercial fishermen, property owners, charter-boat captains, shrimpers and others whose livelihoods have been marred by the explosion aboard the BP drilling rig Deepwater Horizon. The blast killed 11 workers and is spewed an estimating 210,000 gallons of crude a day into the Gulf.
Other real estate executives residents are bracing for losses and living with uncertainty.
“It will have an impact because people come here to (rent waterfront condos) and go to the beach and eat the seafood. Many end up buying because they enjoy all that so much. We look for that maybe not to be the case,” said Lydia Davis, a Re/Max broker in Pensacola, Fla.
“It’s going to hurt us hard – probably as much as Ivan," she said, referring to the 2004 hurricane that swept across the Florida panhandle. “That was really bad.”
Exactly how home devaluations will play into lawsuits against BP and other companies remains as murky as the oily Gulf waters because “it’s all going to depend on how much (comes in) and how long it takes to clean it up,” said Robert Cunningham of Cunningham Bounds LLC in Mobile, Ala., the lawyer representing Miller and other plaintiffs in eight suits that are seeking class-action status.
“Certainly that’s a consideration everybody has in the back of our minds,” said Cunningham, himself a seaside property owner and 30-year resident on Mobile Bay. “So far, the real people being hurt are the shrimpers, oystermen and the charter boat captains who could lose their entire livelihood. I’m not one to complain compared to the problems they face. Nevertheless, we’re all concerned about the ecology. We all grew up fishing and using the water for recreation. And the prospect that it could change dramatically is upsetting to everybody.”
Business owners in Alaska similarly filed a class-action suit against Exxon after the company's Valdez tanker ran aground in 1989, leaking nearly 11 million gallons of crude.
“I was told the other day that 20 percent of the business owners in the Exxon Valdez suit were deceased by the time it was settled,” Miller said. “Even if a settlement moves quickly (here), if I don’t get any insurance money, five years from now I’m out of business.”
For homeowners to collect legal damages from BP, they’ll have to prove in court that their real estate appraisals show a dramatic before-and-after reduction in their home values as a result of oil tainting their beaches, Cunningham said.
In a statement BP posted recently on its website, the company said it would pay “all necessary and appropriate clean-up costs,” including “property damage caused by the oil ... as contemplated by applicable laws and regulations.”
But Pensacola, Fla., property appraiser Larry Rich questions whether BP will help homeowners recover lost value.
“How are they going to do that?” Rich asked. “It would be amazing if everybody who owns a condo unit on the beach gets an appraisal now so that one year from now – if they haven’t sold – they can tell BP it’s because of the oil slick ... so they can show (BP) that their $400,000 or $500,000 condo has depreciated by $150,000.”
While Gulf Coast homeowners anxiously scan the horizon and simultaneously watch their home values, many agree the spill has injected extra uncertainty into a housing market already beset with peril due to occasional hurricanes. What’s more, the Obama administration in late March proposed opening huge stretches of the Atlantic coastline, the north coast of Alaska and the eastern Gulf of Mexico for additional or first-time oil and natural gas drilling.
“It’s frightening from the perspective of one isolated incident and what the consequences are,” said Miller. “Until somebody really digs into this (catastrophe) and has all the facts, how do you make that decision?”
“There is risk (inherent to this market). It is part of the game,” said Jon W. Ritten, of Diamondhead, Miss., president of the Gulf Coast Association of Realtors. The potential hazards of future oil accidents “now are going to have to be looked at. Up until this point, it hadn’t been a factor.”
Because Realtors and homeowners who are hardened to the dangers of a big hurricane landing every two to three years see a far different mathematical reality when contemplating oil spills in their Gulf.
“Once,” Ritten said, “is bad.”