Oil Spills and Real Estate
Oil spills and Real Estate
Politics aside, the BP Oil Spill in the Gulf of Mexico is having a ripple effect through the entire economy. Real estate doesn’t exist in a bubble and the mess in the gulf is proof positive of this. You see it all boils down to capital and the allocation of capital and the free flow of capital. Right now and for the foreseeable future, capital will be tied up in areas of than real estate.
Two weeks ago the phone started to ring, in the course of two days, four people inquired about my residential real estate listings here in the Triangle of North Carolina. Sadly, none of these people were interested in buying homes. They were all, leaving everything behind in Florida and starting over; they either wanted to rent or rent to own. Like the dust bowl of the Great Depression all of these people related to me that they were cutting their losses and getting out of the area to protect their health and the health of their children.
Here’s the capital tie up. The real estate market in Florida crashed about four years ago, people were short in the values of their homes, and they owed more than those homes were worth in many instances. The real estate market in the gulf regions of Florida had started to recover on a slow mend back to “normal.” Normal is still a far cry from the boom of five years ago. Realistically capital in real estate was pretty nonexistent; people didn’t have equity to sell their homes, incur moving expenses and purchase new homes, but there was a light at the end of the tunnel. Little did any of us realize that light was a freight train guised as a massive oil spill in the gulf, which let any air left out of an already deflated real estate balloon. When folks feel the need to cut and run and leave everything behind there is going to be a heck of a cost incurred.
Pundits are fast to point out all that’s changed in the Gulf of Mexico and the Gulf States of the US. So, I’ll pundit too; real estate has changed in that region and the effects will ripple across our economy and perhaps a worldwide economy.