Crude topped a record 75 dollars per barrel in New York trading Friday, five dollars up from a week earlier.At the same time, US retail pump prices were topping an average three dollars a gallon (3.8 liters) in many places in the country, up 60 cents -- 33 percent -- from a year ago.
Consumers are getting squeezed. AP Reported "Self-serve regular averaged $2.91 a gallon, up from $2.67 two weeks ago, said Trilby Lundberg, who publishes the nationwide Lundberg Survey of 7,000 gas stations. Mid-grade hit $3 a gallon, up from $2.76, while premium climbed to an average of $3.10, from $2.86 two weeks ago."
Check out this Gas Price Google Mashup. Very Neat.
People are being financially squeezed due to the high gas prices. It is especially difficult for low income people and those who need to drive large distances. The more people spend on gas prices the less they have or are willing to spend on housing. This really is the 'perfect storm.'
Posts
fwiw,that might also help close-in housing values relative to the further suburbs.
ReplyDeleteREALITY CHECK!
ReplyDeleteI don't see how gas prices will affect the housing bubble. I commute between Silver Spring, MD and Reston, VA. I spend about $25 more a week compared to several years ago. This equates to about $100 extra a month which is insignificant to a mortgage on outragouesly priced house or even a mortgage on a purchased house several years before the bubble.
Even if gas were 25 cents a gallon I still could not afford anything in the Washington Metro area.
80s_grad,
ReplyDeleteWhat vehicle do you drive? Sounds like you have something reasonable and level-headed for such a commute.
Do you drive during "standard" rush hours? 7-9 am and 4-7 pm?
bryce
ReplyDeleteI have a 99 Toyota Camry Sedan. Mornings 8 am, evenings 7 pm.
Even if I had a mega SUV that costs me twice as much in gas, this still would be a small percentage of the mortgage on a silver spring piece of real estate at today's prices. I would also add that it's safe to assume I have an average or worse then average commuting cost.
Sounds like you are getting good mileage, and your car might be paid for. That's good!
ReplyDeleteFor many people the "cost" of such a commute is more than just money - it is wear and tear on their nerves. (I'd be one of those people). Other people seem to look forward to being in their cars for a commute like yours - in which case there is really no additional "cost" other than monetary.
I used to drive from Herndon to College Park twice a week during the evening rush.... Ouch.
Lets say a household has two SUVs that each average 18 miles per gallon. Each car is driven 15000 miles a year. If gas averages .70 cents more during the year their annual extra fuel cost rises by $1166. No small chunck of change.
ReplyDeleteGas may impact those on the margins who are just trying to get buy - in some cases because they bought too much house. Combined with rising interest rates on ARMs this could make a real difference.
ReplyDeletedavid said
ReplyDeleteLets say a household has two SUVs that each average 18 miles per gallon. Each car is driven 15000 miles a year. If gas averages .70 cents more during the year their annual extra fuel cost rises by $1166. No small chunck of change.
I agree that $1166 is no small chunck of change. Now let's compare that amount with the increase of annual housing cost for this average family in a average property in the Washington metro area..........BIG DIFFERENCE!
I'm back to my original question, which is an annual increase of $1166 in commuting cost going to discourage a family from buying a property (house, townhouse or condo)?
tom dc/va
I must admit that financial decisions of "most Americans" baffle me.
dc_too
ReplyDeleteFuel cost causing inflation, causing interest rate increases.
You hit the nail on the head!
Now I can agree with David's statement "This really is the 'perfect storm.'"
I think if you're going to complain about SUVs you could pick ones that aren't like tall sedans and in general have pretty good gas mileage (e.g. the CRV and RAV4...)--use the Landrover's and Escalade's of the world to make your point. If people are going to buy SUVs anyway, we at least want to encourage them to buy the small ones (again, the Rav4 and the CRV).
ReplyDeleteoops just reread your comment, missed the word "even", sorry about that.
ReplyDeleteI agree fully with all the commentors who point out that that a rise in the price of oil effects a lot more then just gas. It raises prices throughout the economy.
ReplyDeleteOn the one hand, I congratulate the Post for finally addressing the real estate issue. But, it is long overdue. The lack of reporting was getting embarrassing - inventories up 500% in some counties and no story?! That was negligent.
ReplyDeleteMaybe I just missed it but I also have not heard any comments on the story that ran last week (in the Post Business section)? It was a fluff piece that basically said "no one really knows where real estate is going." (Link below)
http://www.washingtonpost.com/wp-dyn/content/article/2006/04/19/AR2006041902320.html
Also of interest - anyone else notice how neither story was in the real estate section? One was business and the other, front page. Sort of an anything to avoid being next to all those ads for new homes….
IMO, the Post still has a long way to go.
The last time gas rose to $3 a gallon (right after Katrina), I was sort of amazed because I saw just as much traffic. No one seemed to be driving less.
ReplyDeleteBut for those two weeks, the business at restaurants near where I live just completely dried up. Restaurants that normally had lines suddenly were empty. It was amazing.
People will drive until they can't, but they will cut out something.
BTW- if you are paying $100 more a month for gas, and you had barely squeezed in to a mortgage contract, these types of gas prices certainly will have an effect.
A Redskins fan
IF we can get 4 things into the politics
ReplyDeletethen the price of gas and the buying from from other countries will be haved:
Drill off shore in all coasts that have oil supply with modern safe technique.
STOP all TAXES at the barrel head to the pump.
Offer a tax credit to consumers for fuel efficient autos.
Offer tax credit for the design and manufacture of NON=OIL burning cars and trucks.
I think the time is ripe for the government to start improving public transportation (despite the strong Auto lobby)and encouraging people to use it. We will have less chaos on roads during rush hour and at the same time reduce fuel consumption per person. Also, time to start implementing once a week telecommuting where feasible! With ever increasing gas prices the housing bubble is history!
ReplyDeleteThis strikes me as a bit silly. Gas costs $7 gallon in Amsterdam:
ReplyDeletehttp://www.csmonitor.com/2005/0826/p01s03-woeu.html
Yet the Netherlands has been a big participant in the global housing boom.
http://www.economist.com/finance/displayStory.cfm?story_id=4079027
Paying an extra $1100 is not a big deal. If you're really that determined to get in the housing market that's not going to stop you -- you'll just go out to eat less, see fewer movies, etc. I doubt many people at all will have their housing purchase plans affected by this.
I am also somewhat skeptical about the inflationary impact. The US is much more energy efficient than it was 20-30 years ago and can handle energy cost increases more easily. Also firms adapt their behavior. The WSJ had an article about this just the other day.
http://online.wsj.com/article/SB114566680528633115.html
Also, re: "It is especially difficult for low income people..."
ReplyDeleteAre low income people really driving the housing boom?
some are stretching to buy lower end properties using toxic mortgages.
ReplyDeleteYes, I believe that lower income people are now driving the housing boom. I think that they are being conned into mortgages they don't understand and that they will not be able to afford in a few years.
ReplyDeleteAs for the suggestion that we reduce taxes on crude oil and start drilling everywhere... and then what? We use that stuff up and then we have to face reality (that oil is not an infinite resource) a few years later.
Better to INCREASE taxes on gasoline and use the proceeds to build a great train system, which would be a far more energy efficient form of public transportation than the highways (our current public transportation system).
A Redskins fan
Redskins fan-
ReplyDeleteAgree totally. Think about it this way - the roads, and cars, we have already are spewing too much CO2 as it is. So I think building more of those is NOT the answer. Instead, we need to think up new ways to live closer to where we work, and live closer together in the first place, so as to make mass transit more effective. (population density = successful mass transit)
For instance, look at NYC or Boston -- their transit systems are good enough that you can "run to the mall" using the Subway or the T. Metro on the weekend here is just a pain in the ass. Trains take forever, and God help you if you need to change trains somewhere. If metro were an actually convenient alternative to driving, rather than just an acceptable way of commuting to work, we'd really be getting somewhere.
kevinr said:
ReplyDelete"I think building more of those is NOT the answer. Instead, we need to think up new ways to live closer to where we work, and live closer together in the first place, so as to make mass transit more effective. (population density = successful mass transit)"
This is the equation that can make a difference in your life. See it for what it is: the sensible progression of things, and you can profit from it and increase you standard of living.
Ignore it, and you'll be stuck in traffic in suburban communities that are dying because you can't do anything or go anywhere without climbing into an automobile.
Just my opinion.
Actually, I really like metro and hope to God they do not try to make it more like Boston or New York, both of which have trashy metros, in my opinion. They keep talking about doing that, though, unfortunately.
ReplyDeletePart of making train transportation more popular, I think, will be making it more like the DC metro (which always impresses visitors) and a lot less like NYC and Boston subways, which just look a lot trashier.
I used to ride the bus everyday a long time ago, and I know that if you do that for a while, you will pay anything to stop. I think that is behind a lot of people's opposition to trains: they imagine standing up on a trashy system like Boston's or New York's, or the local bus, and they just say to themselves "no way."
A Redskins fan
"Better to INCREASE taxes on gasoline and use the proceeds to build a great train system, which would be a far more energy efficient form of public transportation than the highways (our current public transportation system)."
ReplyDeleteOf course, in order for trains to be successful you need high population density and short distances. If you're traveling from DC to Chicago it is better to take a flight. The only place where a train system makes much sense is the Northeast.
Developing trains beyond that would just be a waste of money -- as Amtrak has proven time and time again.
colin
ReplyDeleteThe only place where a train system makes much sense is the Northeast.
Not true. There are several highly success routes across the nation.
1. Boston to Portland ME. (6 trains daily each way)
2. Raleigh to Charlotte
3. Chicago to Detroit
4. San Diego to Sacramento
If you don't believe me go the www.amtrak.com and check out the news release section
TRAINS RULE!
1. Boston to Portland ME. (6 trains daily each way)
ReplyDeleteUm, isn't this the Northeast?
Also, how is this "success" calculated? Carrying passengers is not enough. If the government gave me tens of millions of dollars, as it does for Amtrak, I'm cure I could transport some people around as well. Doesn't mean it would be efficient or successful.
Further, these routes confirm what I said -- trains only make sense over short distances with high population density. Raleigh-Charlotte and Chicago-Detroit are both examples of that. There are relatively few areas in the country where we find this. From Texas straight north to the Canadian border for example a passenger train network would not make sense.
Colin
ReplyDelete"trains only make sense over short distances with high population density"
I agree that trains would have a stronger advantage.
From Texas straight north to the Canadian border for example a passenger train network would not make sense
I disagree, we need alternatives to the heavily burdened highway and airways. Also air and vehicle transportation cost are much more sensitive to fuel cost then railroads. Don't forget air and vehicle transportation are heavily subsidized. Who provides to airports and air traffic control infrastruction? Who provides the highways? A whole lot of money was forked over for the beautiful Ronald Reagan terminal.
I bet if Uncle Sam would fork that kind of money towards Amtrak, Amtrak would be on par with the European rail system
The Dutch rail system has been privatized. So has British Rail. The best way to place Amtrak on par with the European rail system would be to privatize it and stop wasting so much money on it.
ReplyDeleteShouldn't be just rail. Like Canada we should also privatize air traffic control.
In any case, back to the subject at hand, it seems that rising gas prices aren't having much of an impact on consumer behavior:
http://www.forbes.com/home/columnists/2006/04/20/energy-costs-gasoline_cx_ns_0420schulz.html
But who knows, maybe people are driving the same amount because they are all forgoing housing purchases. Riiiight.
More on gas prices:
ReplyDeletehttp://www.randomuseless.info/gasprice/gasprice.html
an AP article came out yesterday on how oil prices are effecting the housing market. What made the aricle inreresting--denial seems to be in play that such a correlation exists. Well think fo the consumer who has a mortgage and I can't pay becouse of 3.00 at the pump. Now the overall prediction for gas prices it isn't going to make 3.00 this summer. Well why not look at the smaller market like Vicksburg ms which don't have competion and ignores the falling barrel price. By the Vicksburg has never dropped below 2.00 like her sister communities did.
ReplyDelete