Gas Price Effect on Real Estate
During the real estate boom when gas was still affordable the effect on real estate was that developers would go to outlying suburban areas and the buyers followed. A common phrase real estate agents and their buyers used was “drive until you qualify”. Today though with escalating gas prices this phrase is beginning to be second guessed by buyers, the trade off of lower home prices in outlying areas is less attractive as each mile of the commute now becomes incrementally more expensive.
What does this mean for real estate investors? The trend will be a shift back to the down town and urban core. Developers will be looking at infill projects to take advantage of this trend. The buyers who bought homes in speculative outlying areas , which are also the areas that will take the longest to recover, are now feeling the squeeze of seemingly paying and arm and leg for their commutes.
When you look at the micro markets and the urban core vs outlying suburban areas the data shows that the urban core’s have been less effected than the outlying areas. The pressure on outlying areas with the over supplies will result in more foreclosures. These former home owners will also fuel rental demand in urban areas as they will be forced to rent closer to work in order to save money.
Based on the gas effect trend, one of the opportunities for real estate investors to take advantage of is to hold or acquire rental units near job centers, urban cores and public transportation, as we are already seeing an increased demand for quality rentals in these areas.
Robert Stec
YAERD.org Advisory Board Member
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