After watching gas prices go beyond $3 a gallon mark sometime last week, I thought about the impact on housing market. Not only it is more expensive for people to drive around but also our disposable income shrink. Less disposable income affected everything. Mortgage payments would now consume more of our earnings. That means people who want to buy now, could reconsider their decisions.
Steal this from Matrix. He has a good analysis of what gas prices mean to housing market.
Mortgage News daily presented the following points in their commentary: The Effects Of High Gas Prices On The Housing Market [MND]:
- Could revitalize urban areas as the cost of commuting outpaces the higher cost of housing in city centers.
- Will place more pressure on city workforce housing issues.
- Will cause the Fed to continue to raise the federal funds rate, tempering prices further as mortgage rates rise.
- Will increase cost of construction materials and labor. These are already stressed due to the high demand and inadequate supply situation the market is currently experiencing.
Who's afraid of $3 gasoline? [econobrowser] there is the possibility that Americans will be shocked with the discovery that more expensive oil is here to stay and decide that significant changes in lifestyle are immediately called for. If as a result, consumers make sudden changes in plans for spending on such things as cars, durable goods, and vacations, vendors of those products may find themselves left in the lurch. This does not bode well for housing, especially investor and second home markets.
Why $75 Oil Does Not Mean Recession [Rutledge] In Washington today Senator Specter earned his 15 minutes on TV by calling for windfall profits taxes on oil.
That would be the single dumbest thing we could do in a world where oil is scarcer by the day. It would decrease investment in energy and mark one more example of our “capitalism when convenient” school of policy.
But why is the US economy still growing when oil is above $70 per barrel? One reason people cite: it would take $95 oil to be as high as it was in 1981 relative to other prices.
Can you imagine what it would be like if oil prices hit $95? Couple that with higher interest rates. All industries will suffer. You think the cost of a cup of Latte at Starbucks could double by then? Scary.
Chart via Matrix. Via Big Picture. Full size chart, here. [gasbuddy]
* Housing: It's Time to Fill Up the Tank [Matrix]

