Wednesday, January 19, 2022

Oil and Real Estate

For the past several years oil (more specifically, gas) prices have been an issue at this time of the year. It seems as though for the summer months the gas companies, not just BP, have wonderful profits—compliments of the American vacationers. Even those of us who fly to that once-in-a-lifetime vacation have a tendency to take other “short drive” vacations in the form of long weekends; and that adds to the demand on fuel and oil company profits.

Today we’re witnessing a tragically different story about oil. The economy of the communities on the northern coast of the Gulf of Mexico is in serious trouble. The story is not related to the U.S. economy. It is about the gulf, “beaches,” and the related enterprises. The focus of the oil issue is solidly on the upper gulf coast, but the spill has had an extended effect on the entire west coast of Florida.

In southwest Florida, bookings (hotels, resorts and vacation homes) are down. In talking to some of my colleagues in the vacation rental business, they are experiencing cancellations due the media. The typical call: “Since there is oil on Florida beaches and it’s coming your way, I want to cancel our Florida vacation.” One agent told me they have added a “money back” policy if oil is found on the local beaches. Others are allowing a shorter cancellation policy in case there is a threat.

“This is supposed to be a real estate column,” you say. And it is. The point of describing the oil issue in southwest Florida, and more specifically Marco Island, is that vacationers become home, and condo, buyers. With vacationers being potential buyers, when the number of vacationers is diminished, the sales numbers go down. Now we’re not talking huge numbers, yet. The Marco Island/Naples area has not and probably won’t be as effected as the northern gulf, but the threat of oil is a factor and may be for some undetermined period.

Consider when Wilma visited Marco Island. The world thought we were annihilated. We had calls from nearly every state in the union and several European nations. I believe that until they put a plug in the well, there will continue to be uncertainty in the coastal Florida real estate market.

Speaking of Wilma, within a few months after she swept through, people began to realize that the reports (thanks to the national media) of Marco Island’s demise were vastly overstated; and the real estate market returned to status quo. The oil issue will be resolved. It’s a matter of when. There is no doubt that environmental issues have been created by the spill and there is more to come. But let’s look at history. Mother Nature has a way of thriving in spite of all that we humans throw at her.

Back to real estate and my opinion of today and tomorrow. I’ve already made some comments on today, but I have a few more, so here goes. We continue to witness too many foreclosures and short sales. While there aren’t huge numbers on Marco Island, they do exist and will continue for, my guess, another twelve to eighteen months. The issue is far reaching because “what happens in the world stays in the world”; and we are part of the global economy. When the rest of the country is in a recession, Marco Island isn’t insulated from it. Therefore, with many foreclosures and short sales throughout the country, Marco Island can’t recover with the same zeal as in previous post-recession periods.

Now for the positive stuff: coastal Collier County (Marco Island and Naples) real estate is beginning to see the light at the end of the tunnel. The recovery isn’t, and won’t be exuberant. But due to the beaches (oil free), the climate and many amenities, people have begun to look to the future and some high-end activity has been initiated. It seems that those who have the comfort of unlimited finances are again choosing Marco Island and Naples neighborhoods for themselves.

Last comment: until the banks become friendlier to the consumer and the small business owner, the economy won’t get beyond a spurt. But after the past few years, Realtors and consumers welcome a “spurt.” A spurt beats a “wreck.”

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