How Will $4 per Gallon Gas Affect The Housing Industry This Summer?
If gas hasn’t hit $4/gallon where you live, get ready. I passed 4 stations today and all 4 were at $3.99/gallon, the highest gas prices we’ve seen since 2008.
According to CBS News’ Bill Whitaker the average American will pay about $750 more for gas this year, per car and some 75 percent of Americans say they are now or soon will be pinching pennies. That’s $750 more per car so in my house that equates to $1,500 more per year or roughly $125 per month. So what affect can we expect to see in the housing industry this summer?
Here are 3 ways I think high gas prices could impact real estate this summer;
- Home buyers may consider looking at less expensive homes.
While for a lot of people, an extra $125 a month may not be a deal breaker in the home buyer market, for those people who living paycheck to paycheck, this can be a lot of money. Smart home buyers look at all their monthly expenses, including entertainment, when determining how much house they can afford.
For some, the loss of that $125 may mean they just can’t or won’t take on the monthly mortgage payment they were originally considering. For others, they can make the mortgage payment but they are questioning whether or not a higher house payment is worth it when they are losing $125 in discretionary income which may mean less entertainment and dinning out each month.One way to buy a home in this situation and not have to give up the entertainment that we all love is to buy a cheaper home with a lower mortgage payment.
It will be interesting the see what happens to the median home price this summer. If it is flat or lower, it’s quite possible that the high price of gas had something to do with it.
- Home buyers may delay their planned home purchase.
Worse than driving home buyers to look for a less expensive home is the possibility that some people will simply delay the purchase of a home this season as they wait for this gas issue to blow over. (and we are all hoping that happens and soon).This will be especially true for home buyers who are trying to squeeze into a home on a tight budget.
This could also affect home prices as when there is more supply than demand, prices generally go south, which also describes the current housing market. It started to look like maybe home prices were starting to stabilize in some parts of the country and $4/gallon gas could put a damper on that.
- People saving for a down payment will need more time to save, potentially delaying home purchases.
People who are very serious about buying a home are the people that have a plan to save up the money for the down payment they will need for their dream home and stick too it. These home buyers are generally very fiscally responsible and they probably have a specific date in mind when they will have the down payment in the bank and start their home search.
For this group of home buyers this simply means they will have to push out the date when they will be ready to start home shopping or find another area of their budget where they can make up the extra $125 a month so they can stay on track with their home savings plan.
Anyway you look at it, the current state of gas prices can only hurt the housing industry in the near future. In a previous post, The Best Time To Buy Real Estate Is Now, I share a number of reasons why I believe this is a good time to buy a home.
For those home buyers who are on a solid financial footing, I still believe that is true. But for those home buyers on a tight budget, the current high gas prices will definitely play into whether or not this is the best time to buy a home.
If you are ready to start home shopping, visit MLS Maps for a list of real estate, homes for sale and MLS listings in your local area.