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Oil May Be the Nail in Florida Housing's Coffin

Forgive my silence on the blog for the past two days, but I've been in beastly hot Pensacola, Florida, preparing stories on mortgage mediation, and, of course, oil. President Obama dropped by the beach yesterday to talk to some local folks, while I spent the day in empty beach front mansions and empty ocean-view condos.

Woman lies on the beach as workers clean up tar balls on the Gulf Islands National Seashore, Pensacola Beach, Florida.
AP
Woman lies on the beach as workers clean up tar balls on the Gulf Islands National Seashore, Pensacola Beach, Florida.

The oil isn't really here yet, just a few tar balls, but the apprehension is everywhere.

This is a housing market that saw prices drop 50 percent in the housing crash.

I'm talking beautiful, grand, beachfront properties, where the sand is positively Caribbean white, and values just plummeted.

The biggest condo development out on Pensacola Beach, the Portofino Island Resort and Spa, with five gorgeous towers overlooking water on all sides, is now seeing its condo prices back at the level at which they pre-sold the project. And these are seriously swank condos that rocketed in value just as they were finished mid-this-decade.

Last year, as investors started to dip their toes back into the warm water here, it all started to pick up, and condos and homes alike were selling again, albeit at bargain prices. Now just the perception, the fear that oil is coming, changed all that in an instant.

"There is no real estate really trading on the beach right now," says Andrew Rothfeder, one of the project's developers. "There have been a couple of sales that have fallen through, and I think it is just human nature, if they are under contract to buy a condominium, and there is a scare like this, they are going to want to put the brakes on and see what happens."

It's not just buyers putting the breaks on, but renters as well, and that will not bode well for condo owners who rely on renters to offset their mortgages. Rothfeder, a self-proclaimed optimist, says he's hoping BP will start writing checks to all sorts of people in Pensacola Beach, including condo owners. But how much and for how long?

Florida real estate expert Jack McCabe isn't so optimistic, especially if the oil starts coming around the Florida keys.

"This oil coming in is going to affect values for years, and there is no telling how many years at this point," warns McCabe. "So it is not just going to have a temporary effect, this is going to have a long term effect on property values anywhere along the coastal regions."

What strikes me, though, in driving around here for the last few days is not the growing fear among the locals, but the sheer number of "For Sale" signs down the beach. They're literally almost every third house. That kind of inventory isn't healthy for any market, forget a beach-front community staring down the face of an oil slick.

Questions? Comments? RealtyCheck@cnbc.com

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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