Skyrocketing Gasoline Prices. Housing units where working people live which are far from jobs are being affected by high gasoline costs. Prices are now experiencing further downward pressure due to high commuting costs to jobs. Think Lancaste, CA or Prince William County, VA, and Pahrump, NV.
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You have to think that a lot of people are just hating waking up in the morning.
ReplyDeleteHopefully, these developments will make people drive more sensibly (insane racing from light to light is gas-intensive), support public transportation initiatives, and stay home from popular vacation spots so that those of us who did not buy exurbia McMansions with an Escalade in the driveway can enjoy our vacations with smaller crowds.
OTOH, I really do not see this making inner suburbs or the city itself more expensive. In downtown Silver Spring where I live, the amount of available housing must have more than doubled in the past few years, and it looks to me like similar things are happening in Bethesda, Rockville, and Hyattsville. There is so much more inner-suburb housing than there was five years ago that my gut tells me supply will overwhelm any demand.
ARF
Makes me glad I own 2 blocks from the metro.
ReplyDeleteARF, have you been sedentary for more than four decades? My gut tells me that is the case, in which case my gut tells me to not trust your (prodigious) gut.
ReplyDeleteACF
"There is so much more inner-suburb housing than there was five years ago that my gut tells me supply will overwhelm any demand.
ReplyDeleteARF"
Amazing thing is, people are buying it. Downtown SS has 168 units of inventory and 24 sales (7 month supply - only a slightly down market. This is much better than MoCo which currently has 9.3 mos, and much better still than most of NOVA. Maybe another sideways to downward year for downtown SS, but long term, with all the planets lining up so heavily against suburbia - downtown SS will be just fine.
Gas prices are killing people...but many don't realize there's another factor demanding oil - plastic. Think about how much plastic we use.
ReplyDeleteMaybe the gas prices will cause people to move closer to jobs, but it could be disaster for some markets.
Fortunately, I don't have to commute at all. So for me, it will be good news that the housing in the outer burbs will fall farther and faster. Just hope that when the time comes to buy, I'll have some neighbors.
ReplyDeleteChip
"Just hope that when the time comes to buy, I'll have some neighbors."
ReplyDeleteChip, you will have neighbors! The will live in McMansions that have been converted into low-income housing and homeless shelters. Suburbia, The New Slums.
Great discussion on this topic taking place at cnn.com's iReports:
ReplyDeletehttp://www.ireport.com/docs/DOC-26932
The following book is a must read for anyone interested in this topic:
ReplyDeleteSuburban Nation: The Rise of Sprawl and the Decline of the American Dream
http://www.amazon.com/Suburban-Nation-Sprawl-Decline-American/dp/0865476063/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1211944834&sr=1-1
"Amazing thing is, people are buying it. Downtown SS has 168 units of inventory and 24 sales (7 month supply - only a slightly down market. This is much better than MoCo which currently has 9.3 mos, and much better still than most of NOVA. Maybe another sideways to downward year for downtown SS, but long term, with all the planets lining up so heavily against suburbia - downtown SS will be just fine."
ReplyDeleteWhat is the source for your data?
Anecdotally, I can tell you that there seems to be a lot of empty stuff, e.g., the Mica taking a long time to sell as David has chronicled. Also, the rental buildings are very empty. My guess is that it is easy to get a good deal on a rental in downtown SS right now. There is just much, much, more housing than ten years ago.
ARF
I'm smelling a rat with this "fuel crisis".
ReplyDeleteFirst off, one thing getting very little press coverage is that a large part of the increase is due to the loss of value of the dollar. Oil is sold in dollars and the people who own the oil now need more dollars if they are to have the same returns as prior to the dollar's loss of value. E.g., If prior to the dollar's decline in value it took $100M to buy a skyscraper in Hong Kong (as an investment property), with the bad exchange rate it may now take $200M to buy that same building. The same happens with all the other investments the sellers of the oil are making. Consequently, for now (that is, until they someday start pricing the oil in a currency not devaluing), they just up the price of the oil per gallon to make up for this. By right, it makes sense since they haven't really raised the price ... They've just acknowledged that the dollars they're being paid in are worth less.
Secondly, I've pointed out before that we are doing a re-run of the '70s and the Vietnam/post-Vietnam era in terms of deficits, lowering value of the dollar, stagflation, house prices, mortgage interest rates etc. And that we are only in the beginning of that same cycle. I just wanted to remind us (or point out if you didn't know) that a decade or so after the "gas crisis" of the '70s it became commonly accepted that there had never been a real shortage (or even an embargo) of oil at the time ... And that the gas crisis had been a carefully engineered ploy by the large distilleries to squeeze out the (then) independent gasoline distributors (i.e., the mom and pop gas stations that predominated at the time ... and pumped your gas for you and took care of all other of your car related needs including repairs). Since we are finding ourselves repeating so much of the '70s, could this "gas crisis" be similarly being engineered?
Just some thoughts.
Of course, from a homebuyer's perspective this means we need to be prepared for massive inflation and for a period of stagflation where inflation combines with reduced economic activity ... and higher mortgage interest rates.
About 5 years ago many cities realized that people wanted to live near the city center. They changed their building/land codes to allow for higher density buildings near the inner citie. Then developers took advantage of this and built condo and townhouse projects. Gas prices are just another stab in the stomack to the people who purchased houses in the suberbs.
ReplyDelete"What is the source for your data?"
ReplyDeletehttp://www.mris.com/reports/stats/
This new web site offers an interesting perspective on the housing/transportation cost issue: http://www.htaindex.org/
ReplyDeleteI work with a man who moved to the DC area for his job. He had to place bids on rental homes in PWC. Why? Because the demand for rental properties is high. He lost one rental because he was outbid.
ReplyDelete(He is foolish to want to live in PWC, but that is another story, and at least he is renting rather than buying there)
That leads to another consideration: The population of the region is rising. Rent or Buy: people need to live somewhere. Does supply outstrip demand? Yes, but demand will always grow. Supply has slowed.
That leads to another consideration: Hong Kong alone is seeing an average of 3,000 new automobiles per day hit its streets EVERY DAY. What everyone seems to be missing is that global demand for oil is rising fast. India and China are experiencing economic booms and the rise of the middle class in their societies. They WANT to own cars and to drive. OPEC is going to leverage this increase in demand, and demand will ALWAYS rise until the US weens itself from the oil teet. Until then, kiss suburban living goodbye.
"http://www.mris.com/reports/stats/"
ReplyDeleteI went to that website, and could not find the data that you were talking about. Nonetheless, let me accept (for the sake of argument only) that your claim is true. You are still only talking about buying, when my informed speculation is that the rental vacancy rate in downtown Silver Spring is very high. Moreoever, there are still multiple condo/apartment projects due to be finished in the next year. So if you really want to live in downtown Silver Spring, your choices have exploded in the last few years. There is much more housing than before, more coming, and vacancies in the rental apartments (at least- if not more in the new condos).
However, what I did see on that website is that while 20910 (the downtown zipcode) shows modest declines from last year, other Silver Spring zipcodes (20906, 20902) show absolute devastation from 4/07-4/08, including sales price drops on the order of 20% and more- in one year. While these zip codes are farther out than 20910, they are very metro accessible. I had not realized that the mortgage devastation was wreaking such havoc there, as I had only seen county-wide statistics, which are not yet that bad. Thanks!
ARF
"I went to that website, and could not find the data that you were talking about."
ReplyDeleteType in zip code 20910 into the search by zipcode box and you will see downtown SS has 168 units of inventory and 24 sales (7 month supply - only a slightly down market. This is much better than MoCo which currently has 9.3 mos, and much better still than most of NOVA. Moreover, this is much better than the national average of bubble and non bubble markets which is running at over 10 months now.
Your point about renting is well taken - if more of these new projects go rental, it will likely drag down rents and with them prices. However, the data suggests that hasnt happened yet, or if it has, not nearly to the extent as in other local zipcodes you cite where prices are down 20% YOY.
Here in Simi Valley, California... there are new foreclosures everyday... our major employers are scaling back (Countrywide Home Loans and Amgen.)
ReplyDeleteAnd, the GAS PRICE IS NOW $4.37!
To save on gas I put the car in Neutral while going down hills...
Every Drops Counts!
ANDY
I have kids in school, it'll be 5 years before they graduate and I can move closer to town. Some folks just can't uproot and move. Once word gets out people are moving to the city, city housing prices will skyrocket. Suburban houses will keep coming down to adjust for the added cost of commuting. Things don't have to be this way, America has lots of oil. We can produce it at $20-$40 a barrel for decades:
ReplyDeletewww.AmericansForJobsAndEnergy.org
As a bonus we can create a boatload of good jobs.
TTFN
Dave
Have you seen this: http://blip.tv/file/894022
ReplyDeleteIt's about gas prices affecting home sales.