How rising gas prices are effecting the real estate industry

Just a few years ago the thought of seeing gas prices hitting over $4 per gallon was unthinkable. Today, its a reality and the odds are prices will continue to climb and hit over $5 per gallon before the end of the year. Fuel prices affect everything, since the majority of goods in the U.S. are moved by truck.

Real Estate Industry

The effect rising gas prices have had on the real estate industry is two fold. Consumers are more concerned with commute time than they were a few years ago, making communities on the outskirts of the city less desirable (its still about location!). In response, developers have switched to mixed use developments, marketing them as live/work areas. Business owners can live right above their place of work, virtually eliminating the need to commute. The monetary savings in fuel costs is a large incentive. Other communities take it a step further by providing free transportation to other areas of town, like the airport and the strip (two of the largest employment areas in the city). As fuel prices continue to go up, I'm sure we'll see more communities offer these type of amenities. Redevelopment of older neighborhoods closer to the city core will also increase.

Energy Star

Almost all of the new homes built in the Las Vegas valley meet the minimum requirements for the Energy Star rating. Currently, a few builders exceed those requirements and build homes that are very energy efficient. To stay competitive with an increased consumer demand, developers are going to have to build even more energy efficient homes. Green buildings may become the standard in the next five years due to energy costs. But its likely that location will still play a huge part in the buying decision. It may effect resales of older, less energy efficient homes in the coming years. Those home sellers will be competing against more energy efficient homes for buyers. A rise in the number of "green" remodelers is a definite possibility and such remodeling may become a necessity to get top dollar for a resale home in the future, since it is doubful that energy costs will be going down any time soon.

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Gas Prices

In New Hampshire, the average commuter uses two gallons of gas a day. Without a carpool that converts into 10 gallons a week or 40 gallons a month in consumption. A .50 increase in gas prices decreases a buyers borrowing power by $3500 without a deduction. When markets tighten up, consumers are willing to commute less and the outer lying community values are depreciated quicker.

Effect of Energy Prices on RE

The post makes some good points. We are seeing more green emphasis in home building, and more buyers wanting to live closer in. Thankfully, gas prices have dropped since this post was made. I believe that lots of people have learned some key lessons.

Now everyone is relaxing about gas prices

But high prices will be back, so long term the close in development and "green" tech will be a great investment.

Scott Patterson
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Light Rail in Charlotte NC

We recently started up the first light rail route in Charlotte and it has been a rousing success ...exceeding ridership projections by about 30%. This success and the high gas prices are creating support for speeding up other routes in the city.

The rail system narrowly won voter approval last year. But now everyone is jumping aboard. I think you are going to see the same thing nationally - with profound effects on the local housing markets.

Gas and housing

I think we are going to see a difference in how people purchase housing. They are looking at public transportation and measuring not just the time to drive to work but the distance as well.

I think gas prices are

I think gas prices are really causing a lot of problems...the commuting and travel distance are going to help some communities but maybe hurt others...


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