Gas Prices Are Way Up. What Impact Will That Have In The Price Of Your House?
Highest gas prices in America
It is no surprise to us who drive that gas prices have climbed to unprecedented highs. In the Bay Area, the price per gallon has reached $5.00, and above, Californians pay the highest taxes for gasoline in the U.S., further increasing its cost.
No signs of improvement
Relief is nowhere in sight for two reasons. First, the war in Ukraine has nearly closed Russian oil exports, and Russia is the world’s second exporter. Second, California’s legislature seems unlikely to reduce gas taxes. At most, lawmakers might delay the subsequent scheduled increase of that tax (July 2022).
Expect a ripple effect
All economists agree that gas prices profoundly affect the general economy. At a personal level, paying more at the pump means less to spend on other goods and services. In turn, the providers of those goods and services also have to raise their prices to compensate for higher energy costs. A vicious circle of inflation, lower consumption, and challenging economic choices ensue.
Location, Location, Location
How does this impact housing prices or sales? First, inflation leads to higher interest rates for all kinds of loans. We have seen a steady climb in mortgage rates throughout 2022. Higher rates immediately translate into higher monthly payments. For home buyers, especially those just entering the market, higher mortgage expenses force them to choose less valuable homes or locations further away from their places of work.
With higher gas prices, the cost of driving to and from work increases. As a result, some people can change their vehicles or resort to public transportation. But others have no other choice but to downtrade in their standards of living.
Not all houses (and Realtors) are the same
But, are all houses prices affected the same way by higher gas prices? That has been a debate amongst economists for quite some time. Some even dare to say that the increase in oil prices triggered the 2008 housing crisis.
The consensus is that not all houses get hit the same way. Upscale homes in central locations seem to fare better. At the same time, more affordable properties farther away from downtown business areas and inaccessible via public transport might decrease in value and take longer to sell.
There is even a theory that the time from listing to selling a house increases because Realtors do not aggressively promote homes that are expensive to reach. They tend to schedule fewer showings and spend less on marketing those properties.
We live in exciting times, and the world around us changes by the minute. The Cal Agents team of Realtors, Marketing, and Renovations experts is what you need to maximize the return on your property investment. And we never forget about our listings, no matter how far we need to drive to show them.