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New CoreLogic Data Shows the Potential Impact of the BP DeepWater Horizon Oil Spill on Coastal Real Estate

August 2, 2010

SANTA ANA, Calif., Aug. 2 /PRNewswire-FirstCall/ — CoreLogic, a leading provider of information, analytics and business services, reported today that the impact of the BP DeepWater Horizon oil spill on home values in the coastal counties along the Gulf coast communities is expected to range from $648 million over one year and to as much as $3 billion over five years for the communities already being impacted by the spill. If the unlikely worst-case scenario occurs and the spill reaches around the Florida Keys and up the Atlantic coast of Florida impacting beach amenities, the additional losses could reach up to $28 billion over five years.

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In the coastal counties of Harrison, Mobile, and Escambia, there are more than 71,000 homes that will potentially be impacted. In addition, there are 15 major counties stretching from the Gulf coast of Mississippi to the Atlantic coast of Florida with more than 600,000 residential properties within 1,000 meters of the coastline.

The CoreLogic analysis relies on established methods for estimating environmental amenity values in general that take into account the annualized economic value of beach access in these coastal communities at risk of being damaged by oil coming ashore and beaches being closed to human recreational use for a period of five years. Buyers of homes in these coastal communities paid premiums when they purchased their homes for access to the beaches and the amenity benefits that they represent.

Specifically, CoreLogic used its public record and parcel data collected in the 15 at-risk counties and combined this with its proprietary geospatial coastline data that accurately identifies the geographic location of the shore. Based on a geospatial query of the public record data using the coastline file, more than 600,000 properties were identified as being within 1,000 meters of the coastline in 15 counties, representing major beach communities stretching from the Gulf coast of Alabama to the Atlantic coast of Florida. The approach, used in this analysis, to the valuation of environmental amenities was developed in the late 1970′s and early 1980′s and is a well-accepted technique for measuring the value that consumers place on a variety of different environmental and residential amenities. In this application, CoreLogic used hedonic price theory to estimate the perpetuity value consumers place on access to beach amenities as a function of distance (in meters) to the beach. The perpetuity value was then converted into an annual annuity value of beach access using the present value discounting approach for an annuity that pays into perpetuity. In this study, the duration was assumed to be five years, but the methodology estimated an annualized economic value, therefore, the five-year estimate is merely five times the annualized economic value of a single year. For example, the single-year loss estimate for the Gulf coast communities is $648 million. In addition to the loss estimates of the economic value of beach access, the already fragile housing markets in many of these communities are likely to experience further distress due to the potential impacts of the oil spill on local economies.

Result Highlights

  • The loss in amenity value is measured as the annuity value of the perpetuity value of access to the beach, measured in distance, for five years because of the environmental impact of the oil spill.
  • The loss in amenity value increases for properties closer to the beach. Figure 1 shows the loss in amenity value as a function of distance, measured in meters to the beachfront. Beachfront homes could incur a loss of amenity valued as high as $80,000.
  • The highest risk coastal communities along the Mississippi, Alabama, and Florida panhandle include more than 71,000 residential homes at risk of losing an estimated average loss in beach amenities valued between $40,000 and $56,000. The total estimated loss of beach amenities is valued at $3 billion.
  • Of the immediately impacted communities, the largest overall loss in amenity value would be in Pensacola ($1.6 billion), followed by Gulfport ($1.2 billion).
  • In terms of average loss in amenity value per home, Gulfport ($56,000) is the largest, followed by Mobile ($45,000) and Pensacola ($40,000).
  • If the Gulf currents take the oil to the communities along the Florida gulf coast the loss in amenity value will rise substantially. The four coastal communities along the coast (Panama City, Tampa Bay, Cape Coral, Naples) could experience a total loss in amenity value of $11 billion impacting 238,000 homes.
  • Even though the chances are low, CoreLogic estimated the loss in amenity value for communities along the Atlantic coast of Florida as well. This includes Miami, Key West, Palm Bay, Daytona Beach, and Jacksonville. More than 295,000 properties within 1,000 meters of the beach could be affected with a total loss in amenity value of $13.5 billion.

“Using well established economic techniques for the measurement of the economic value of environmental amenities an estimate of the loss in beach amenity value is substantial. While it is by no means a certainty that the major coastal communities along both coasts of Florida will be impacted at all by the oil spill, the lost amenity value in these markets could be particularly high,” said Mark Fleming, chief economist with CoreLogic. “The total loss in amenity value in communities already being impacted by the oil spill to date is potentially as high as $3 billion over five years. Our hope is that the oil spill is contained and the loss in amenity value is further moderated by a speedy cleanup and a return of beach amenities to the affected communities’ homeowners.”

Methodology:

CoreLogic used its public record and parcel data collected in more than 3,100 counties across the United States and covering 99.8 percent of the U.S. population and combined it with its proprietary geospatial coastline file that accurately identifies the geographic location of the shore. Based on a geospatial query of the public record data using the coastline file more than 600,000 properties were identified as being within 1,000 meters of the coastline in 15 counties representing major beach communities stretching from the gulf coast of Alabama to the Atlantic coast of Florida. The approach, used in this analysis, to the valuation of environmental amenities was developed in the late 1970′s and early 1980′s and has been a popular technique ever since for understanding the value that consumers place on a variety of different environmental amenities. In this application we use hedonic price theory to estimate the perpetuity value consumers place on access to beach amenities as a function of distance (in meters) to the beach. The perpetuity value is converted into an annual annuity value of beach access using the present value discounting approach for an annuity that pays into perpetuity. Finally, we assume that the recreational value of beach access is restricted by the oil spill for five years to estimate the value of beach access at risk of being lost.

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                                                 Avg.      Avg.   Total Loss
    County       CBSA                #Properties Distance  Loss   (mm)
    ------       ----                ----------- --------  ----   ----------
                  Panama City-Lynn
                  Haven-Panama City
    Bay           Beach, FL                54701      341 $43,219     $2,364
    ---          -----------------         -----      --- -------     ------
                  Palm Bay-
                  Melbourne-
    Brevard       Titusville, FL           66327      402 $48,240     $3,200
    -------      ---------------           -----      --- -------     ------
                  Miami-Fort
                  Lauderdale-
    Broward       Pompano Beach, FL        19203      507 $55,031     $1,057
    -------      ------------------        -----      --- -------     ------
                  Naples-Marco
    Collier       Island, FL               14262      407 $44,877       $640
    -------      -------------             -----      --- -------       ----
    Duval        Jacksonville, FL          10573      382 $46,593       $493
    -----        ----------------          -----      --- -------       ----
                  Pensacola-Ferry
    Escambia      Pass-Brent, FL           39368      318 $39,882     $1,570
    --------     ----------------          -----      --- -------     ------
    Harrison     Gulfport-Biloxi, MS       21221      516 $56,469     $1,198
    --------     -------------------       -----      --- -------     ------
                  Tampa-St.
                  Petersburg-
    Hillsborough  Clearwater, FL           32475      456 $50,200     $1,630
    ------------ ---------------           -----      --- -------     ------
                  Cape Coral-Fort
    Lee           Myers, FL                49429      419 $47,251     $2,336
    ---          ----------------          -----      --- -------     ------
                  Miami-Fort
    Miami-        Lauderdale-
     Dade         Pompano Beach, FL        32194      419 $48,935     $1,575
    ------       ------------------        -----      --- -------     ------
    Mobile       Mobile, AL                10520      396 $44,662       $470
    ------       ----------                -----      --- -------       ----
    Monroe       Key West, FL              79399      235 $35,603     $2,827
    ------       ------------              -----      --- -------     ------
                  Miami-Fort
    Palm          Lauderdale-
     Beach        Pompano Beach, FL        41619      494 $54,029     $2,249
    ------       ------------------        -----      --- -------     ------
                  Tampa-St.
                  Petersburg-
    Pinellas      Clearwater, FL           86968      396 $45,702     $3,975
    --------     ---------------           -----      --- -------     ------
                  Deltona-Daytona
                  Beach-Ormond
    Volusia       Beach, FL                45699      338 $45,866     $2,096
    -------      ----------------          -----      --- -------     ------
    Total                                 603958                     $27,679
    -----                                 ------                     -------

Source: CoreLogic

The data provided is for use only by the primary recipient or the primary recipient’s publication, website or broadcast. This data may not be re-sold, republished or licensed to any other source, including publications and sources owned by the primary recipient’s parent company without prior written permission from CoreLogic. Any CoreLogic data used for publication or broadcast, in whole or in part, must be sourced as coming from CoreLogic, a real estate data and analytics company. The citation must directly accompany the first reference of the data. If the data is illustrated with maps, charts, graphs or other visual elements, CoreLogic must be cited with these visual elements. For questions, analysis or interpretation of the data, contact Lori Guyton at lguyton@cvic.com or Bill Campbell at bill@campbelllewis.com.

Data provided may not be modified without the prior written permission of CoreLogic. Do not use the data in any unlawful manner. This data is compiled from public records, contributory databases and proprietary analytics, and its accuracy is dependent upon these sources.

About CoreLogic

CoreLogic (NYSE: CLGX) is a leading provider of consumer, financial and property information, analytics and services to business and government. The company combines public, contributory and proprietary data to develop predictive decision analytics and provide business services that bring dynamic insight and transparency to the markets it serves. CoreLogic has built the largest U.S. real estate, mortgage application, fraud, and loan performance databases and is a recognized leading provider of mortgage and automotive credit reporting, property tax, valuation, flood determination, and geospatial analytics and services. More than one million users rely on CoreLogic to assess risk, support underwriting, investment and marketing decisions, prevent fraud, and improve business performance in their daily operations. Formerly the information solutions group of The First American Corporation, CoreLogic began trading under the ticker CLGX on the NYSE on June 2, 2010. The company, headquartered in Santa Ana, Calif., has more than 10,000 employees globally with 2009 revenues of $2 billion. For more information visit www.corelogic.com

CoreLogic is a registered trademark of CoreLogic, Inc.

SOURCE CoreLogic


Source: newswire



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