Lower gas prices could fuel the housing marketDate posted: 12/9/15 02:45:00 PM
It goes without saying that lower prices at the gas pump make life easier on commuters, but the recent drop in gas prices could be fueling something else: the housing market.
Maggie Parker of Comstock Homes told CNBC lower fuel prices provide a major boost to the nation's real estate market.
"Anything that impacts anyone's monthly budget so significantly as the cost of gasoline will tend to make them feel better about moving up, buying a new home," Parker said. "Our traffic is very high, and sales are quite good - especially during the typically slow December season - so it has had a very positive impact on the confidence of our buyers."
Parker expects lower fuels costs to have a positive impact on consumer confidence. Usually when people are confident about the economy, more people are willing to pull the trigger on a home purchase.
Like Parker, Adele Morris of the Brookings Institution believes lower gas prices will make a mark on the housing market. Morris told The Washington Post a 10 percent increase in gas prices can shift the average home values with a range of roughly $13,000.
Morris said lower gas prices make homes farther from urban areas more attractive. A report from the Brookings Institution stated a 10 percent fluctuation of gas prices increased home values near urban areas by $5,600. Homes that are located farther from such areas had price drops of around $7,800, according to the report.
"What this means for today is that if people expect the low gas prices to persist, it's going to make homes in the outer areas more attractive than they would be if gas prices had remained high," Morris told the Post. "The question we ask is how much more do people care about where they live when gas prices are high and how much less do they care when gas prices are low. We're looking at relative changes."
Morris doesn't believe the cost of commuting is the only reason home values rise or fall with fuel prices. She said some well-off neighborhoods are much less likely to be affected by gas prices, which would make their property values less susceptible to major changes in gas prices.
Lower fuel costs a 'nice present'
Phil Flynn, senior energy analyst at The PRICE Futures Group, told CBS Chicago affiliate WBBM-TV falling crude oil prices have been responsible for lower prices at the pump.
"It's a nice Christmas present for most of America," Flynn said.
Fuel prices in Chicago, historically home to some of the most expensive fuel prices in the Midwest, recently fell to a five-year low, according to WBBM.
Prices at most gas stations throughout the city fell below $2.50 per gallon. The national average is hovering around $2.37 per gallon, according to GasBuddy.com.
"For most Americans, it's a huge tax break," Richard Dugas, CEO of Atlanta-based Pulte Homes, told CNBC. "If you think about the consumer confidence impact, the thing that really drives housing is how people feel, and when they have more money in their pocket, they feel better."
Tips for future homebuyers
Americans with lengthy commutes might find the drop in fuel costs to provide enough savings to consider making a home purchase. For prospective buyers in that boat, there are a few things to consider before making a purchase.
FOX News recommended all potential buyers consider the total cost of owning a home, not just the monthly mortgage payments and down payment costs. Buyers should factor in taxes, insurance and even monthly utility costs and services such as a cable bill.
FOX News said accounting for all monthly costs can help buyers better plan their budgets and avoid falling into debt.
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