Gas prices up, housing prices down

Yes! Gas prices have been a consideration for us. A home isn't cheap if you are paying hundreds a month to get to and from work.

For the sake of ease of calculation, if one assumes a price run up of 2 dollars per gallon since the halcion real estate days, and an extra driving distance of 30 miles each way for a total of 60 miles each working day, this adds up to an extra 300 miles per week. This is about an extra 12 gallons per week. At $3.50 per gallon, this is $42 per week. There is also some extra wear and tear on the car. Assume a 45 week work year and this is $1890 per year + wear and tear on the vehicle or roughly $150 per month. This is more for gas guzzling SUVs and less for econocars.

Also, the greatest run up in price has been in past year and the real estate problem predates the current gasoline concerns.

Is $150 per month really enough to explain the "proximity" phenomena? Perhaps the psychology of the price rise is more significant than the actual monetary amount. I would look to other reasons to explain the fraying of our urban fringes.

Sorry for second post / I forgot to include the final step. Since it is the marginal cost that is relevant, the cost difference of the $2 increase X 12 gallons per week = $24 per week X 45 weeks = 1080 divided by 12 months = 90 dollars per month extra - marginal cost (out of the total $150 per month), since the extra cost of transportation (150 - 90 = $60) prior to the price rise was not a concern to those who opted for the longer commutes. So the question should be, is $90 per month enough to explain the phenomena?

I'd go along with this thesis to a certain extent, if it wasn't for the fact that my recently purchased house 40 miles from work would cost me about 50% more 5 miles from work. Plus there is a simpler solution if your gas bills are high: get an econobox (and it doesn't have to be a Prius - I picked up a Corolla manual after Katrina - figured out that my break point on gas savings v. purchase price @ $3.50 a gallon was somewhere around 400,000 miles on the car). We won't even go into "savings" in that if I actually lived in Boston, I'd have to send two kids to private school - wherein the tuition cost would exceed my mortgage payment.

Wouldn't you be able to also say "Milk goes up, housing prices down?"

Wouldn't that relate in a sense, too?

My husband and I consider ourselves really lucky. We own a house just outside of Boston, and within a couple minutes walk to public transportation. And in good weather, we bike to work. We only drive our economy car on the weekends to buy groceries and visit friends. In the summers, we have a vegetable garden too.
Although we ourselves haven't adapted a new lifestyle, I do think people are starting to think twice about where they live, how they get to work and what they can do to save a few dollars.

Don't forget that there _are_ actually high paying jobs out in the exburbs... not everyone living there is commuting into the city everyday. As a high-tech worker, one of my greatest concerns about my recent condo purchase near the city was that I might one day end up having a long commute. The majority of jobs for software engineers are outside of the 128 loop.

How about this angle? Now that mortgage loan requirements are more stringent, as in more down payment required, even if the faraway house doesn't end up cheaper after gas, at least you can get into it. You don't need a down payment on your future years of gas consumption, you just have to trust yourself to come up with it.

Good point by Dave here. Most of the high-tech stuff is between 128 and 495, not inside 128. Best thing that I can recall was having a meeting at a Boston law firm with a bunch of businesses involved in a union pension plan. After we all shelled out $40 to park for a couple of hours, we pretty much agreed across the board that Boston was a mutually inconvenient place to meet.

Sure gas has gone up, but don't think that will be the driving factor to bring people back close to the city... jobs aren't necessarily located in Boston anymore.

Have to agree with Dave, too. I've been in high tech for 10+ years here in the Boston area, the jobs are up and down 128 and 495, and along Route 3. Financial, government and higher education work is in downtown Boston.

The only reason I go to Boston now is to pick up someone at the airport, maybe some trips to a museum or two.

Gas prices are up because the US Dollar is down, are we to assume then that house prices will increase as the Dollar goes back up which it ultimately will in this never ending cycle.

There has been a population boom in the exurbs in recent years, but I think it's a case where the question "Which came first, the chicken or the egg?" can be answered. Tons of people moved to the exurbs in search of cheaper housing, and as gas prices increase, people aren't going to move closer to their jobs. The jobs will find the talented workforce who are already living by I-495. I think places like Westboro and Stoughton are going to keep experience commercial growth as more and more companies move out there.

GB makes a good case for why gas price increases shouldn't matter all that much. On paper it's not a back-breaking amount of money. But here's a counter thought: it's not the current numbers, but the volatility and uncertainty.

For the last year or so I've budgeted $160 a month for gasoline: four tanks a month at $40 a tank for our one car, a small SUV. Now I'm paying $45. This isn't a whole lot more in the big picture, but still I find myself worrying over it. Why? Because it's gone up so fast for one thing, and what will the price be next month? These rapid gas price hikes are also coming at the same time as rapid food price hikes. I've watched my grocery bill go from $130 a week to $150, to $175. I thought we'd levelled out there, but now who knows?

Buying a house is generally a long-term thing. If you buy this lovely exurban house today you might be ok with commuting costs tomorrow, but what about five years from now when gas prices are $6 a gallon? What are you getting yourself into?

My husband and I have recently moved from an exurb (Acton) to inside the beltway. It wasn't just the cost of gas, but that was a factor.

What GB and others are not taking in to account, is that living in Lexington (or Newton, Arlington etc - all with decent schools), not only can I walk to public transportation, but I can also walk to almost all major services: Bank, PO, Supermarket, Library, Restaurants, Dentist, Doctor.... etc.

We were able to go down to one car, and that alone has saved us more money than just "$90 a month".

I live in Southborough, and my wife and I both work at a big company in Southborough, clearing over 250k a year combined. Big home, big yard, great jobs, 3 mile drive to work, beautiful small peaceful town.

The high price of gas has not hit us one bit. People living in the city are actually being hit harder with record rate fare increases on the T.

BurbLover, that's all well and good but I hardly think yours is the typical situation. The population of Boston is roughly 600,000 at night, then doubles during the day, "to about 1.2 million. This fluctuation of people is caused by suburban residents traveling to the city for work, education, medical purposes, and special events."

http://en.wikipedia.org/wiki/Boston,_Massachusetts#Demographics

Ok, take away a few of those people for education, medical purposes, and red sox games. What you've got is a large number of people commuting into the city, and that won't change dramatically anytime soon.

@burblove, even if gas hits $7/gal you guys can still afford to commute 60mi/per day without a dent in the budget. :)

Gas price does not effect where we look to buy a house. The distant to work plays a small part in the decision making, but it is not because of the gas price -- the commute time is important. However, it does not stop us from buying a house that we love -- after all job is very volatile and we don't expect or see ourselves work in the same company for the rest of our lives.

I don't believe in "gas expense is high, home isn't cheap". The gas price has no correlationship to the home. That's just an excuse for the housing price messes. It would be more appropriate to say "gas expense is high, owning a car is very expensive". Compare to a home makes no logical sense.

BurbLover,
Congrats on "Clearing 250k a year" Thats really good for you. But you are in the top 1% of earners therefore obviously the rise in Gas prices will not hurt you one bit. But the avg couple making $100k it is becoming a problem.
Like you I live in MetroWest as well and work along rt 9 in between 495 and 128 it is a great place to live and especially raise kids. But I do see the value of my home going down a bit due to the distance from Boston. Not everyone makes the kind of money you and I make and it is going to have ramifications for the overall economy.