5-22-08 by dugan
The link between skyrocketing oil prices and food prices, for instance, or airline bankruptcies, is obvious and immediate. But the housing crisis? A new study makes the case: a direct correlation between commuting distances and collapsing prices. The group CEOs for Cities, which encourages urban revitalization, says:
A new analysis shows that high gas prices are not only implicated in
the bursting of the housing bubble, but that the higher cost of
commuting has already re-shaped the landscape of real estate value
between cities and suburbs. Housing values are falling fastest in
distant suburban and exurban neighborhoods where affordability depended
directly on cheap gas.
A news release has the short version and the study itself (big pdf alert) has the data and backup.
Here’s what we used to call in the news business the "nut paragraph"–no, not crazy talk, but the heart of the matter:
The run-up in gasoline prices has re-written the calculus of suburban housing economics in two key ways. First, there has been an income effect: suburban households spend more of their income on transportation and gas and have therefore taken the biggest hit to their budgets. As a result, they have less income to spend on housing. Second, there has been a price effect: because living in distant suburbs requires more driving, potential buyers are now willing to bid less for houses at the suburban fringe.
Yeah, in 1990, with gasoline just above $1.00 a gallon, that 4-bedroom 2-bath out in the fringe ‘burbs made economic sense. At $4.00 a gallon, even $3.00, it can be a choice between commuting and falling behind on the mortgage.