April 20, 2011
The Gulf Oil Spill and Its Impact on Coastal Property Value Using the
Don Epley, Director USA Center for Real Estate Studies
Summary of Results
*Deed recordings from courthouses in Baldwin County, Mobile County, and three Florida Coastal communities were examined;
*Deeds were assembled on three 2010 dates: April 19, June 15, and August 15;
*Types of land use and locations in Baldwin County reported here were the following:
Condos built on the sand
Single-family residences built on the sand
Vacant sites on the sand
*The number of deeds examined included the following:
Baldwin County: 2440
Florida condos: 2495
Florida SF residences: 2310
Florida vacant land: 361
*Using the Before-and-After Procedure, the impact from the Oil Spill was the following:
Baldwin County condos built on the sand = 0
Baldwin County SF residences on the sand = 0
Baldwin County vacant sites on the sand = -16.2%
The before-and-after procedure (BAAP) is applied to Coastal Alabama property to estimate the economic loss in property value caused by the recent Gulf oil spill. The project is unique in that it relies on market trends shown in the total population of deed recordings that allows the total impact to be estimated with its dynamic nature. The results indicate that the oil spill has minimal influence on property value for waterfront condos and single-family dwellings,
and approximately 16 percent decline in value on waterfront residential land. The procedure employs control areas from Florida which eliminates the influence of the current recession prior to any impact from the spill. This technique and resulting figures add to the professional appraiser’s knowledge of applying the before-and-after rule to environmental shocks to the local market.
The project has several unique components:
First, it illustrates and recommends a real-time dynamic application of the BAAP to re- examine a possible change in any property value caused by an alleged stigma. The Appraisal Institute’s text states that it can vary through time.
Second, it applied a real-time component through the use of all deeds recorded in the local court houses. It does not involve the normal selection of three-five comparables as the medians represent the total population to represent the total market. Using trends selected from the total population of sales is new to the appraisal profession as the body of knowledge is based on a small sample size.
Third, the data was organized into a matrix where monthly deed statistics can be inserted to update older data with the buyer’s current view of the local market. This allows for additional results to be obtained for approximately 150 different land uses and any location. Thus, a data system has been established that can be continued should additional funding become available. The important result is that we are organized and prepared for future disasters.
Fourth, this author was invited recently to present the overall nature of the project to a BP Oil Consortium sponsored by the State of Louisiana, LSU Board of Regents, and the National Science Foundation. This project was the only one investigating property values among
academic institutions in Louisiana, Mississippi. Alabama, and Florida. The procedure and results should be of interest to future researchers.
Fifth, perhaps the most significant contribution should be to the appraisal profession. This project illustrates procedure and results. This became evident after a presentation given to a state appraisal chapter meeting. A number of attendees revealed privately a lack of knowledge in both areas of procedure and best data.
Additional information is available from Donald Epley at depley(at)usouthal.edu.
The entire article is available in PDF format: