Will High Gas Prices Save Close-in Neighborhoods?

In a discussion last month where we discussed the relationship between gas prices and home purchase decisions, I made the following assertion:

…mathematically the decision to move closer just because of higher gas prices doesn’t really make sense.

In the last few days I’ve run across a few news articles that again make the contrary claim that “fuel prices are driving major changes in the way U.S. residents live,” so I thought I’d revisit this topic. Here’s one such story from The Boston Globe. Locally, The Olympian had a similar story: Homebuyers look to cut commutes and fuel cost:

South Sound homebuyers are looking for houses closer to work, to cut the high cost of commuting brought on by record fuel prices, real estate agents and their customers said Wednesday.

It’s another indication that skyrocketing fuel prices are driving major changes in the way U.S. residents live.

Keller Williams Realty associate broker Phil Harlan said gasoline prices and the cost of commuting are frequent concerns raised by prospective home buyers.

Thurston Regional Planning Council senior planner Pete Swensson said home-buying decisions can change when consumers are faced with higher fuel prices.

A likely result is that the county’s urban housing market could strengthen while the rural housing market softens, Swensson said.

Home Hunters Realty of Olympia broker Helen Wilkins agrees. She said that if gasoline prices continue to rise, it could result in a huge influx of people wanting to live closer to town.

Let’s take another look at the numbers on this. Suppose we have someone that’s commuting from Marysville to downtown Seattle (35 miles). They’re driving a car that gets them 20 MPG, so their monthly commute costs at $4 a gallon would be $280.

“Screw that,” they say, and decide to move closer-in, to Shoreline. So they sell their average house in Marysville for $300,000 (close to the May SFH median for that part of Snohomish County), and buy an average home in Shoreline for $400,000 (also close to the median). We’ll be generous and assume that they bought in January of ’03 for $185,000 and didn’t extract any equity, so they walked away with 50% equity out of the sale of their Marysville home after taxes and agent fees.

Up in Marysville, this hypothetical family was spending $280 a month on gas and roughly $1,120 a month on PITI, for a total of $1,400 a month. So lets see how they will do in Shoreline.

The new commute to downtown is only 10 miles, which shaves their monthly gas bill down to just $100 a month. Sweet! Unfortunately, even with $150,000 down, their PITI payment on the new Shoreline digs is about $2,000, bringing their combined monthly total to $2,100—$700 a month more expensive.

Monthly Gas Costs for Commuting
Click to enlarge

But what if gas prices keep rising, won’t it make more sense then? At $8 a gallon, it costs $1,645 to live in Marysville vs. $2,150 in Shoreline. At $10 a gallon it’s $1,820 vs. $2,200.

Pretty much any way you slice it, the higher cost of housing close-in far outweighs any financial benefits you get by cutting your commute.  Run the numbers for any pair of far-flung vs. close-in cities around Seattle and you’ll find the same thing.

By comparison, if that same family stayed in Marysville but sold their 20 MPG car and bought a used Prius that gets 45 MPG, they save nearly $200 a month (at $5/gallon), while the upgrade only cost about $10,000 up front.  Heck, they could probably trade straight across for a used Saturn that gets 30 MPG and still save over $115 a month.

The picture is slightly better for first-time home buyers, since they’re comparing both locations at today’s prices, but it’s still not a financial win to go close-in. A potential first-time buyer with a downtown commute looking at putting $20,000 down on an average home in Marysville can expect to spend $2,400 on PITI + commute, vs. $2,850 in Shoreline. With $50,000 down it’s $2,230 vs. $2,780.  That’s still $450-$550 a month more to live close-in, with the high cost of housing more than negating their gas savings.

Again, I’m not trying to advocate moving out to the boonies. I place a high personal value on living close to my place of employment, and consider avoiding time spent sitting in traffic to be far important than the cost of gas. What I’m trying to get at here is that the “high cost of gas” argument for why close-in neighborhoods will somehow retain their value just doesn’t wash.

There is value in living close to your job, but with the current dynamics of home prices and gas prices, that value is simply not financial.

(Rolf Boone, The Olympian, 06.19.2008)

  

About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

106 comments:

  1. 1
    DT says:

    A few thoughts, in case nobody on the site has addressed this yet:

    1. The analysis of cost per mile to drive a car should include the “variable” wear-and-tear costs on the car in addition to gasoline. This would make the argument for living close in more compelling.
    2. My guess is that generally speaking, many of these buyers are buying on a perception that they’re saving money by living close in, rather than a detailed analysis of the type you have described. Perceptions, right or wrong, can increase demand for in-city homes.

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  2. 2
    vboring says:

    you can’t just talk about fuel costs.

    the federal estimate for the cost of travel (including everything, wear and tear, increased maintenance, depreciation, etc) is $.50 per mile.

    aside from being closer to work, people living closer in tend to drive less for everything. grocery store, mall, dentist. all of these services are usually much closer than they are in the boonies. i usually drive once a week to go grocery shopping.

    people close in tend also to use the bus more for the work commute, since the time spent is often more tolerable.

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  3. 3
    vboring says:

    if you use the Federal $.50/mile number, every mile further away you live costs you (2 ways x 1 mile x $.5 x 50 weeks x 5 days) $250/year

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  4. 4
    The Tim says:

    I have a feeling those federal estimates are quite a bit inflated.

    AAA estimates the cost per mile for maintenance and tires at $0.055 for a mid-sized sedan. So let’s say we tack on an extra $0.25 per mile and run the calculations again at $5/gallon.

    Marysville
    Commute: $525
    Total: $1,645

    Shoreline
    Commute: $150
    Total: $2,150

    For the first-time buyer w/ $20k down…

    Marysville
    Commute: $525
    Total: $2,645

    Shoreline
    Commute: $150
    Total: $2,900

    Still doesn’t pencil out.

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  5. 5
    Ben says:

    Tim, I think that you have to consider the difference between whether people are reacting to something and whether it makes sense to react to it.

    Most people don’t do this much cold analysis before moving. And the kind of people who are most hit by fuel prices are also the most likely to rent.

    Whether it is irrational or not, people will move closer in because of higher gas prices. That is my feeling anyway.

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  6. 6
    Andre says:

    I find the whole hysteria about fuel prices very funny. Buying a home closer in makes even less sense than buying a hybrid.

    For me, significant factors are time spent commuting and especially the schools, these two combined with price/value are factors driving my decision process, gas price is not a factor at all.

    Surprisingly the last week or so I see 2 houses that sold in my Renton neighborhood. Very surprising considering the fact that I saw houses stay on the market for 6+ month here with the only new listings poping up and nothing else going on. Anyone else see any movement?

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  7. 7
    rose-colored-coolaid says:

    It seems to me that few people are thinking they’ll save $$$ with $4 gas. Rather, they are looking for predictability. If gas went to $20/gallon in 2014, the family in Shoreline doesn’t care very much, because they locked in their mortgage in 2008.

    What’s difficult about all this that, for the first time nearly 100 years, primary modes of transportation are changing. One technology that looks very promising is plug-in hybrids. But if you get a median home close in, you might only have street parking. How will those people plug in their car at night? Meanwhile, the family further out might have room in their garage to plug in 3 cars and still lock the door so nobody else can siphon off power when they aren’t looking.

    Our world is changing, and I personally think gas will continue to get more expensive while travel will actually get cheaper. Problem is, nobody really knows right now…

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  8. 8
    BubbleBuyer says:

    As someone that bought in a “close in” neighborhood, all I can say is BOOYAAAAH!

    Gas prices didn’t factor in to my buying decision, I just wanted to be able to readily access the amenities of an urban center without living in the middle of it. The proximity to downtown (<2 miles) dramatically reduces my monthly mileage. I generally walk to the grocery, bank, coffee shops, restaurants. The only time I really drive is when I want to get into the country over the weekends or for the obligatory run to Home Depot or Lowes.

    I don’t think may people would consider selling and buying closer in purely based on gas prices at current levels unless they face 2+ hour daily commutes. However, I think people actively in the market may very well look more favorably at a closer in home than one further out. For me, the cost of gas & wear / tear is only a small factor making long commutes unattractive. How do you attach a price to frustration, dealing with self absorbed idiots on I5, wasted time, stress? There will always be those that value space more than proximity however, and space really only becomes viable 20+ miles outside the city unless you are loaded. For me, close in is the only way to go.

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  9. 9
    NotaBull says:

    If gas prices have a significant impact on where people decide to buy houses, then I expect Everett and Redmond to be the net winners. After all, doesn’t EVERYBODY work for Boeing or Microsoft around here? That’s what I was told anyway…

    My wife commuted from Seattle to Redmond for a year, and since we moved “out of the city” to a quiet suburb we are *saving* money on gasoline even with the increases over the past 12 months. BTW, we still live within a mile of supermarkets and restaurants and all that stuff, although I can’t smugly walk to the local Starbucks to get some chocolatey coffee. :)

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  10. 10
    Garth says:

    From what I have seen it seems to be more physiological than purely financial.

    Food and gas prices rising rapidly provides a more constant reminder to people that things are tough than a fixed monthly payment spread out over long periods.

    If someone bought a house in snohomish, a full sized truck for himself, a SUV for you wife and also own gas burning recreational items (boats, atvs, jetskis, motorhomes) this is killing them as monthly costs are increasing and everything they own is depreciating rapidly.

    More than the total cost it is about those costs being predictable.

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  11. 11
    Dave says:

    A new article on the Seattle Times website states that the IRS has raised the auto mileage deduction from 50.5 cents per mile to 58.5 cents per mile, effective July 1st. This is a 15.8% increase.

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  12. 12
    BubbleBuyer says:

    “NotaBull // Jun 23, 2008 at 12:46 pm

    ……BTW, we still live within a mile of supermarkets and restaurants and all that stuff, although I can’t smugly walk to the local Starbucks to get some chocolatey coffee. :)”

    Gas saved per week $25, Less time stuck in traffic each day $50, Fewer visits to the shrink $75….smugly walking to Starbucks for chocolatey coffee daily…PRICELESS!!!

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  13. 13
    vboring says:

    Tim,

    how can you doubt the accuracy of a Federal calculation?

    it is funny that the AAA number comes in 90% lower.

    i guess the federal number must include depreciation, which will be nearly unchanged by incremental miles.

    if you could go from a two car family to one car by moving close enough that at least one commute could be reasonably done via bus, though. maybe that’d be worthwhile.

    the edmunds true cost to own estimate claims that the total cost to own and run a car for 5 yrs is at least $25k for most any car less than 5 years old.

    reducing annual costs by $5k by eliminating a car could be getting closer to making a move economically justifiable.

    the smug burnt coffee walk helps too.

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  14. 14
    AndyC says:

    Tim,
    What happens if I move from Marysville to Shoreline where I can now drive 1 mile, then take employer paid/subsidized mass transit?
    Andy

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  15. 15
    AndyC says:

    To add to my previous comment:
    Taking mass transit would also eliminate my daily parking cost of $10-12 ($200-240/month).
    This certainly doesn’t apply to all circumstances, but it can be a factor for many people.

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  16. 16
    Alan says:

    But rising gas prices will cause the prices of housing close to job centers to fall less then they would have fallen had gas prices remained roughly constant. Conversely, prices in the boonies will fall further than they would have without rising gas prices.

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  17. 17

    LIFE CYCLE COSTS

    Tim, good article and interesting take on a gone green world that sometimes forgets “life cycle costs”. Hades, even the AF forgot life cycle costs on the tanker contract according to the GAO. Its simple math, but very human to forget to crunch correctly too.

    I’m a nuclear engineer too, so know ya can’t build a nuclear plant unless ya get the money invested back in like 20 years, well, with cars its more like 5-10 years [they wear out much faster]. Let’s approximate 7.5 years on a typical car life.

    A $25K Prius costs $10K more than a $15K Corolla, roughly your $115 a month gas savings over the 20 mpg rig from Marysville. But its more than that, ya gotta save the $10K more ya spent in 7.5 years of approximate car life. Can you?

    Let’s run the approximate numbers, like we would for the nuclear reactor justification:

    ($115 x 12)= $1380 savings per year x 7.5= $10,350….

    Hey, ya break even if you use the higher priced hybrid for 7.5 years.

    You mentioned a used Saturn, that gets more convoluted since a lot of good used car buys devalue like 70% in 2-3 years….in that case, don’t build the nuclear reactor….its not cost effective….lol

    Recycling used cars is great for the environment too, just think of the reduced carbon footprint not making all that metal, plastic and toxic nicad batteries…lol

    We don’t build nuclear plants either because of the waste, similar dilemma.

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  18. 18
    TJ_98370 says:

    how can you doubt the accuracy of a Federal calculation?

    vboring – Are you being serious?

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  19. 19
    GreenSpaces says:

    I think buyers who cite fuel costs as a reason to move closer in wanted to move closer in anyway, they just needed a hot burning issue to get them off the couch to take some action. There’s nothing like hitting in the pocket book daily that will get them moving, literally.

    My husband reverse-commutes from West Seattle to Everett. He used to commute to Redmond. He’d much rather drive farther at closer-to-normal speeds than be stuck in traffic coming home from MS in a commute that takes anywhere from an hour to two hours during rush hour. What a total waste of time. Can you imagine what it does to your quality of life to put 2 hours of free time to do anything you want back into your life? Not to mention it really does a number on your mileage when idling in traffic for so long.

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  20. 20
    been there says:

    I thin Bubble Buyer you hit it on the head when you said

    ‘ don’t think may people would consider selling and buying closer in purely based on gas prices at current levels unless they face 2+ hour daily commutes. However, I think people actively in the market may very well look more favorably at a closer in home than one further out’

    I think this is dead on accurate.

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  21. 21

    Off-topic but I’m sure bubbleites will enjoy:

    Realty Check: Harvard on Housing (see link for video)

    Details on a new report showing the housing downturn is unlike any other in history, with CNBC’s Diana Olick….

    Interesting video… “BUBBLE” is officially mainstream knowledge…

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  22. 22
    David McManus says:

    “If someone bought a house in snohomish, a full sized truck for himself, a SUV for you wife and also own gas burning recreational items (boats, atvs, jetskis, motorhomes) this is killing them as monthly costs are increasing and everything they own is depreciating rapidly”

    I know a family in this exact scenario out in Snohomish. They bought over there last year and were bragging about how big their house, er….McMansion was. 5 people in the household, each with their own gas guzzler and each drives in to the city every day. No thought about carpooling or telecommuting; they’re just oblivious to everything. Apparently, they feel that it is normal to spend close to 1200 a month just in fuel. Last time I saw them they were bit*hing about the gas prices….I just had to laugh. No sympathy from me for their choice to live in East Bumf**k. When I bring up the fact that they are officially upside down in their house, they huff and puff and talk about houses being a better investment than stocks, media hype, strong local economy etc. Typical real estate talking points.

    By the way, when is the spring bounce supposed to happen?

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  23. 23
    biliruben says:

    Man, you’re more cruel that I can stomach.

    Whenever I run into someone like that, I just get uncomfortable and feel embarrassed for them and their intractable situation.

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  24. 24
    Eleua says:

    I’ve got someone on ClearcutBainbridge that floated this argument, and I’ve been too distracted to get back to him. I was going to make the same argument, only corrected for the WSDOT ferries, and the uber-hip Toyota Prius (complete with “Obama ’08” bumper sticker).

    You know it’s bad when people are saying that high energy prices will save the inner city. They all act like there is a fixed amount of discretionary income and high energy prices don’t weigh on everyone. Yes, if I’m driving from Sequim to Bellevue and back for my daily commute, I will spend more money than if I drive from Mercer Isl. I’m under the impression that high gas prices reduce everyone’s discretionary income, which reduces the available funds to buy property.

    The only thing that is remotely accurate is that you will spend less on gas than someone with higher commute costs, but everyone gets hit.

    The desperation in the RE perma-bulls is just amazing (and quite comical).

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  25. 25
    b says:

    Gas prices are, inflation adjusted, back to levels seen in the 1980’s. Was there some huge influx of city living back then too? Nobody is buying more houses in city because of gas prices, its just another stupid theme that sounds plausible enough for a bored newspaper reporter to do a story on. I will believe it if there is some hard data 5 years from now about suburban decline and in city flourishing all over the country. Until then its just anecdotes and speculation.

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  26. 26
    AMS says:

    Tim-

    Your graph is labeled wrong. The $8/gallon should read $7.50/gallon.

    It might be interesting, however, to relate commute times to property values. Remote property values should go down as energy costs go up. I have been wondering if the cost of energy isn’t one of the major factors driving the prices down in Clark county.

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  27. 27
    jon says:

    People prefer to live close in, and are willing to pay somewhat of a premium to do it for reasons having nothing to do with gas prices. If that premium is too high, then they will keep driving until they qualify. While gas prices won’t by themselves tip the balance, they do shift the premium so that more people will choose to move a little closer in. The net effect is that a bunch of people live closer than they would have.

    Furthermore, suppose you did find a convincing analysis that it made no financial sense to live in a particular burb. What would happen? Prices would immediate drop in the exurbs as people sold and moved closer. The price would drop until it no longer made sense to move in closer. That is a partial explanation for what has happened over the past year as prices have already dropped in farther out areas. You need to look at the prices that held before the run up in gas prices, because today’s house prices already have adjusted for the current gas price.

    A couple of other things missing in your analysis. First, is how often you have to replace Priuses. They barely make financial sense now on their own now, so they aren’t going to help make up the difference in a longer commute. Second, the impact of inflation is bigger than simply considering a single other price point. There is in effect an asset in a closer in house because of its proximity. The value of that asset goes up with the price of gas, and so you have to figure that appreciate into your model as well, even if the idea of appreciating land value is anathema.

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  28. 28
    Garth says:

    It really has more to do with perception. McMansions big trucks and SUV’s are no longer cool, they are seen as inefficient costly and not green, while hybrids, walking and riding public transportation and eating organic food are now seen as cool. From a financial standpoint, it would make more sense to by an old civic for the price of the hybrid premium, but people buy the prius because it is cool.

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  29. 29
    NotaBull says:

    Miles per Gallon isn’t as important as Gallons Per Year.

    I don’t know why young professionals that take the bus to work every day and walk to the store would ever buy a Prius. If all you use a car for is going out of town on the weekends, then buy a used Civic for heaven’s sake. Getting that Prius will hardly save any gas (in actual gallons per year), and you can proclaim your superior greenness far more by saying you bought a used car. Plus, you can cover a used car with more Vegan bumper stickers without feeling like you’re affecting the value too much. Just kidding. :)

    In the example of someone that’s hurting due to a 20MPG commute because of “expensive” gasoline, then how about making gasoline cheap again? It’s simple, buy a used Honda Civic (say 8-10 years old) and sit on the freeway at 35MPG. Voila, your monthly gas bill has magically rolled back to what it was several years ago and your gas bill is now cheap again. Magic!

    Gasoline is not expensive – it is simply much less cheap than it was before. Obviously, price increases like this over a very short period of time cause immense pain to those that, in hindsight, made very bad decisions with 15MPG 25 mile commutes. A similar price increase over 5 years would have been much less painful and allowed for people to adjust over time with regards to their car purchase decisions.

    I say all this while owning a 15MPG SUV. But I don’t drive it. I work from home and we drive the other car when going out of town. It gets occasional local use and mountain use, and that’s it. My Gallons per Year for that SUV is very low indeed. Better than most hybrids, that’s for sure.

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  30. 30
    B&W Nikes says:

    I haven’t owned a car for over 14 years and have been an occasional user of my wife’s car for many of them. I make it to work in 20-30 minutes – walking or busing. For our situation, the expense of an entire additional vehicle would bump up our living costs more significantly than a couple of hundred bucks a month. When vehicle purchase, maintenance, gas, and insurance are all added to time spent in daily drives through a congested corridor during peak travel hours it pencils out significantly to stay close in – for the two of us and our work needs, anyway.

    I like to live in city because I like to walk to the store, dinner, movies etc… it’s just more a enjoyable experience for me. Being a one car household does have some real limitations (like when buying anything bigger than you want to carry), but it’s great that it’s not a travel ordeal to pick up small routine items, and our monthly travel costs are very low. There’s a real ethical benefit in not using more than we need to in order to get done what we need to get done as well. I’m amazed every time I walk past the I-5 crawl that it is a daily routine for so many tens of thousands of my neighbors.

    Something tells me nothing is going to “save house prices” anywhere entirely from the national credit withdrawal, but the economy of living very near work and services is really worthwhile for all but the most rural oriented lifestyles.

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  31. 31
    johnsgonefishin says:

    Most people don’t analyize cost benefit. The gas hits the the pocket book every fill up and in someways every time we look at the fuel gauge. It produces irrational financial decisions including decisions to move closer to work, trading in a car for next to nothing to make payments on a new hybrid. People are not smart in general they are reactionary. This is an example of that.

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  32. 32
    Brian says:

    Another thing that I haven’t seen mentioned (not that I read all 31 comments), is that when you sell your house in x years, you’ll likely be able to sell your Shoreline house for 33% more than your Marysville house. So I guess you should really only compare the interest paid on the more expensive house, not the principle. (granted not a big difference).

    I think psychology plays a big role as well. When you’re sitting in traffic, already annoyed at wasting time, now we’re even more annoyed at wasting gas.

    Clearly there’s a reason Shoreline is more expensive than Marysville. Gas rising in cost would definitely increase the difference in price, but you’re right, only by $100 / mo, and what’s that, like 8% of the total interest payment?

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  33. 33
    Joel says:

    Close-in to what? I just drove back from Seattle to Bellevue on 520 at 5:30pm and it was completely clear. Going the other way, however, was completely backed up. It seems the “close-in” areas are on the Eastside and not in Seattle at all.

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  34. 34
    Harley Lever says:

    I think your assumptions are flawed in that people tend to purchase a home based on what they can afford or qualify for. Price is the primary limiting factor.

    Generally people say “I can spend $300,000 for a home. What can that get me?”. This causes them to compromise on size, location, and amenities. Rarely do they say “I must have a 2000 sqft. house, 4 bedrooms, 3 baths, in Greenlake and price is a secondary, or tertiary consideration”.

    Moving closer in generally gets you less house, but with the less house comes lower heating costs (assuming energy prices are equal) and lower commuting costs (assuming you are moving closer to work).

    You know the American way is to buy as much as you can qualify for. If they can qualify for $400,000 in Marysville they will look for $400,000 homes in Shoreline and trade-off on size, location, and amenities as their secondary considerations.

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  35. 35
    seth says:

    33 comments and nobody has discovered that it has *nothing* to do with homeownership?

    ‘k. So let’s pretend you *don’t* own a house. Let’s pretend you’re renting… and you’re renting in Fall City ‘cuz it’s cheap and that’s where your last boyfriend lived before you broke up with him. Let’s say you wait tables on Eastlake because you get better tips – call it $100 more a month. Suppose you just about make ends meet – you’re living paycheck to paycheck. You’ve got 28 miles to drive each way – and when gas goes from $2.50 to $5 a gallon, you abruptly receive a $100 a month incentive to move closer to work. If you’re already month-to-month, you start looking for a new place *tomorrow.* Barring that, you start looking for a job closer to home – you can take home $100 less a month and break even, and actually make more money as gas prices continue to climb. And if enough of your friends and neighbors do similar, it’s enough to raise the rental rates on Eastlake, lower them out in Fall City, and change real estate values.

    I live most of the time in LA. And believe me – traffic is down. http://latimesblogs.latimes.com/bottleneck/2008/06/traffic-slightl.html

    Best guess is if you’ve got a service sector job in LA and you live in the valley… you’re either riding the subway (which sort of works), or you’re finding a job in the valley, or you’re moving. No matter what, you’ve changed the demographic.

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  36. 36
    EconE says:

    Soon, every condo/housing/apartment complex on the side of the highways will have the “If you lived here, you’d be home by now” banner.

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  37. 37
    Harley Lever says:

    Econ E… You must have lived in Arizona at one point. Those signs are everywhere in AZ!

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  38. 38
    Scotsman says:

    For what it’s worth, Zillow has dropped the value of the house I live in $1500 since Friday. While it’s true we live half an hour from downtown Seattle, I doubt gas prices had a thing to do with this latest decrease. The fact that oil is now $137 a barrel will be affecting much more than just fuel costs- the whole economy will suffer, and housing values will drop further as a result.

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  39. 39
    george says:

    Who told you humans were rational? The price of housing goes through the roof and this is called good news. Gas prices go up and everyone goes completely crazy.

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  40. 40
    jon says:

    george: Why is it not rational to think that when an asset owned by 2/3 of Americans goes up that people are happy?

    Besides driving, the other big impact of energy cost is heating/cooling. Seattle is pretty fortunate in both of those. Higher elevations around here, like Issaquah, are going to cost more.

    I will not missing my old heating oil tank I left behind in Massachusetts. Those suckers are going to cost near $1000 every time to fill this winter.

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  41. 41
    Harley Lever says:

    Zillow has increased my home value by $7000 in the last 30 days and $1000 since last night. Interbay/Magnolia

    I agree that an economic downturn will put downward pressure on all homes.

    I think this particular analysis lacks an accurate depiction of the true purchasing psychology of a typical home buyer as well as the other economic benefits or having smaller, closer in homes.

    If they qualify for $400,000 they will look for homes in a $400,000 price range as a primary consideration, location, size, and amenities are secondary. The idea that they will save the $100,000 and not buy a bigger home is… un-American. :)

    Smaller urban homes costs less to heat versus the suburban McMansions.

    Living closer to any job-core whether Everett, Redmond, or Seattle will reduce your fuel costs providing that you live close to them and work there. Seattle just happens to have more jobs, better mass transportation infrastructure, higher amenity density, and people willing to pay a premium and expect less to live closer Seattle. I know of renters paying $3000 a month for 1 bedroom condos.

    Not needing a car or having 1 car versus 2 has a huge economical impact on the true financial outcome and is an urban reality which is not part of this analysis. Consider all the other traveling besides work, and then consider the subsequent fuel cost. I put 4,000 miles on my car last year in Seattle,I have never put less than 15,000 miles on my car in any point in my life living in the suburbs.

    Factor in all of the above and we might approach a more accurate analysis.

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  42. 42
    Reefer says:

    I don’t believe people are or will be moving JUST to shorten their commute, but for people currently on the market for a home I have no doubt distance to work is an increasingly important consideration as gas prices go up. We already see this happening in the auto industry — most buyers are not trading in cars only because they want better mileage (although the news loves to profile people who do), but those that are already in the market for a new car are gravitating to compact cars over trucks & SUVs much more than a few years ago.

    Also, as previously mentioned, I don’t think most people say “I need X number of beds/baths/square feet regardless of cost” as is assumed in the example. People shop primarily by price, and obviously if they’re going to move to a higher demand area, they may very well simply downsize, just as people are doing with cars.

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  43. 43
    EconE says:

    With these higher gas prices I can’t for the life of me figure out why King5 has a story like this coming out today.

    http://www.king5.com/video/news-index.html?nvid=257240

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  44. 44

    Okay, so if it is more a quality of life thing; people wanting to spend less time commuting regardless of gas prices then why do beat up little crapholes in Ballard cost half a million dollars? Ballard’s not that close to downtown. South Park is just as close. Or does there need to be a tipping point of a certain number of white people moving into the neighborhood for prices to really escalate?

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  45. 45
    TJ_98370 says:

    Okay, the question needs to be asked. Do we have a bubble with respect to oil prices?

    Rate this comment: Thumb up 0

  46. 46

    “Okay, the question needs to be asked. Do we have a bubble with respect to oil prices?”

    Absolutely. As economies all over the world are being dragged down, oil prices can’t keep going up. China and India are not immune from downturns. Having said that, it’s hard to predict tops and bottoms. I knew that home prices were too high and would fall, but it happened later than I expected. I wouldn’t be surprised to see oil prices drop to 110 dollars a barrel, i just can’t tell you when.

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  47. 47
    george says:

    Jon,

    Fuel prices are up, but how much compared to the inflated cost of housing? Plus, I don’t see how the economic consequences of the housing bubble can be called good news.

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  48. 48
    faster says:

    On the subject of lower heating costs because your close in house is smaller. Well, your close in house is also probably much older, and if it was affordable, it’s probably not been updated anywhere near to modern construction standards.

    The house I’m in was built in 1927.
    It’s half the size of the house I used to live in (Built in 1987)
    And costs twice as much to heat.

    Modern construction is an amazing thing. Even with 1980s double pane windows, this 1927 house can’t hold the heat in to save its life…or my bank account.

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  49. 49
    Mark says:

    The long term trend is definitely against the internal combustion engine. Some quick numbers:

    China population 1,320,000,000 – bbl per person per year 2
    India population 1,130,000,000 – bbl per person per year 1
    U. S. population 304,000,000 – bbl per person per year 25

    The developing world is going to put a huge strain on the price of oil and the ability of the world to keep up with that demand. The world currently consumes around 85million barrels per day. If the developing world consumes even 1/4 the amount of oil as we do, it’s going to be ugly.

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  50. 50
    Harley Lever says:

    With regard to oil prices, I wouldn’t be surprised if we were being “Enron-ed”.

    Shell claims that their Nigerian Oil fields were being attacked and therefore “shutdown the oil field”. Information like this is hard to confirm as well as the ability to measure the level and true effect of the attack. Incidentally the attack took place 63 miles off shore… how convenient.

    One thing that should be understood is that OPEC is not on our side. For many of these nations, oil makes up the majority of gross national product. To think that they truly care about affordable oil is laughable. Their prosperity is directly tied to the price of oil.

    India and China both have huge populations and are in the midst of industrialization. Their growth and need for oil will be increasing and more difficult to mitigate.

    Opening up ANWR or other offer-shore oil fields will take 10-years before we see the first drop. Much of our problem has to do with refining capacity. You can pump all the crude you want, but if you cannot refine it, then what is the point?

    Go solar, go wind, and go hydro-kinetics!!!! Our electrical infrastructure is already here! How about giving these industries the $12 Billion in tax credits that we give big oil? How many contractors could we put back to work if they were to install these systems? How much money could we save militarily not having to protect and patrol oil tanker routes or having bed-fellows who cause us to compromise our morals for oil?

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  51. 51
    Harley Lever says:

    Faster,

    There are hundreds if not thousands of brand new condos, townhouses, houses available (obviously more condos and townhouses). You can buy a 1927 farmhouse in the suburbs and have the same problem.

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  52. 52
    what goes up comes down says:

    “Living closer to any job-core whether Everett, Redmond, or Seattle will reduce your fuel costs providing that you live close to them and work there. Seattle just happens to have more jobs, better mass transportation infrastructure, higher amenity density, and people willing to pay a premium and expect less to live closer Seattle. I know of renters paying $3000 a month for 1 bedroom condos.”

    Harley give me a break — you must know some real, real STUPID people. You can rent a house in Mag or Ballard for less the 3k a month.

    I have stated this before but in case people missed it — DOWNTOWN SEATTLE IS NOT THE JOB CORE.

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  53. 53
    LUC says:

    what goes up comes down,

    I agree with you 100%. In fact, the closest employer to Magnolia, Amgen on Elliot Bay, laid-off employees last year and plan more lay-offs this year. They also terminated the expansion of that facility.

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  54. 54

    BUYING 8-10 YEAR OLD USED CARS

    Assuming those cars were driven 15K a year we’re talking cars with 120-150K milage on them. Ask any mechanic in Seattle, all brands of cars (Civics too) experience the most likely “something big pops” between 100-150K milage. In most cases the repair bills at that stage are more than the cars are worth too.

    Another problem with 7-10 year old cars (any brand), the rubber seals (they’re all made out of the same material) on the doors, trunks, transmissions, etc., dry up crack and leak (that’s why you buy those little tree shaped air fresheners) to cover up the mildew smell on older leaky rigs. Lift up that plastic mat in the trunk and check for moisture rust….it hides there (smells too) and can eventually rust right through the trunk…this can cause a worse problem, gas fumes in the car.

    Also, 7-10 year old paint jobs (any brand) may look marginally OK, but many look like Hades too, and years ago, when the car had like 20K milage on it, the paint job glossed far better than its “current oxidised look” with 100K+ rain batterred Seattle miles on it. Of course you can repaint it, add that to the mechanical costs in my 1st paragraph, now you have a money pit like a 1927 Seattle house…lol

    I see some those 8-10 year old Civics on the road, with new paint jobs, customized and chrome wheels [I know they put way more into the car than what it was worth], some with blue smoke pouring out the pipe too….lol

    No, most 10 year old cars are hardly worth $100. Ask a dealer when you try to trade it off….lol

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  55. 55
    notabull says:

    “Higher elevations around here, like Issaquah, are going to cost more.”

    Right, because when I go to Issaquah, the 200 feet elevation gives me severe headaches and nosebleeds! :)

    Issaquah is colder in the winter because it’s less influenced by the water, and not so much because of the tiny elevation increase from sea level.

    Given that most houses in Issaquah are much newer than most houses in Seattle, I would be willing to bet that the average Issaquah house would cost less to heat than the average Seattle house. Even though it’s likely larger, the more efficient heating system, insulation, and sealing will more than make up for the size increase and slight temperature difference.

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  56. 56
    Mike2 says:

    People who are too poor to afford gasoline aren’t the ones buying in close in neighborhoods.

    If you can’t afford an extra $2K/yr in gas, you can’t afford to move to a more expensive area.

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  57. 57
    what goes up comes down says:

    Additionally, who are buying the houses from the people selling them in the “outskirts” to move closer in? Or how about this point if the “outskirts” are/will tank first — who will afford to move closer in then?

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  58. 58
    economist says:

    I think your assumptions are flawed in that people tend to purchase a home based on what they can afford or qualify for. Price is the primary limiting factor.

    Bingo. Higher energy costs reduce disposable income, and thus affordability, for everyone. But the loss in disposable income is lower for those living in the central areas. So, higher energy costs will exert downward pressure on house prices everywhere, but more so in the outlying areas.

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  59. 59
    Al in the boonies says:

    I live in north bend and commute to downtown seattle. This is 30 miles. For me, I take the metro bus and telecommute one day a week. Although I live away from the city, I am able to commute using only 4 Gallons a week.. I had a chance to join a Vanpool for $80 bucks a month, but enjoy my commute so I declined – but it is another option.

    People are taking the rise in gas prices too seriously.

    Your post is right on

    Also, The newspapers are also going overboard on the reporting of gas prices because thats what they do

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  60. 60
    vboring says:

    if you move close enough that you can eliminate one car, moving closer in should justify at least an extra $70k in house prices, using current interest rates.

    $5k/yr cost of having a cheapish car (according to edmunds true cost to own) gives you $415 per month, which at 30 fixed at low rates is about $70k.

    plus, theoretically, money put in a house is at least partially an investment whereas money put in a car is an expense.

    if you assume half of the money put into a house is investment and half is expense, maybe it’d make financial sense to pay an extra 140k to live close enough to be able to get rid of 1 car.

    this roughly works for renting location analysis, too. except that all money spent on rent is obviously an expense.

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  61. 61
    TJ_98370 says:

    I have stated this before but in case people missed it — DOWNTOWN SEATTLE IS NOT THE JOB CORE

    wgucd – That is a good point. The assumption in these type discussions seems to be that “everyone” works in downtown Seattle. If most workers do commute to downtown Seattle, I can see where increasing gas prices might have some limited effect on home price trends relative to downtown proximity. However, how accurate is the assumption that the majority of workers in the Seattle region commute daily to downtown?

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  62. 62
    Dave says:

    Nice numbers – too bad life isn’t numbers.

    I live in Maple Leaf. Lets say I am 20 minutes one way closer to work than if I lived in Marysville. That’s 40 minutes a day – no big deal right? That’s 40 more minutes a day I can spend with my 2 year old son. He goes to bed around 7:30 and we get home around 5:00’ish. During the week that 40 minutes extra/day translates to about 3 hours 20 minutes extra with him – and approximate 15% increase in the amount of time I can spend with him/week.

    Tim – how would that figure into your calculations?

    Not being in a car has value.

    Dave

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  63. 63
    Dave Lincoln says:

    Other Dave,

    Agreed, but then, this has nothing to do with the increase in gas prices lately. I think that there is a point at which, between the time savings, the decrease in stress (due almost soley to the fact that modern drivers don’t understand the concept of the “passing lane”, which is every lane but the right one), the possibility of getting rid of one of the vehicles completely, and, NOW, maybe $100 or $200 savings in fuel per month, the decision to live closer gets made.

    I have heard all the pink pony comments I need to hear, but I will say that one thing Seattle has, is that almost all real neighborhoods, meaning not gated or non-gated McMansion subdivisions, have commercial businesses very close to housing. I have been around to many cities, and this is NOT what you see everywhere. Go to Atlanta and see what I mean. Whether you are in Shoreline, or South Park, or Queen Anne, there is usually a street with a grocery store, drug store, movie rental place, bank, etc. within easy walking or biking distance. This is absolutely not so within the new type of neighborhoods. Walking just sucks there unless you are a mall-walker type, walking to nowhere. The streets are made curvy on purpose, there is no grid, so the quickest distance between 2 points is through many peoples backyards – bring your pepper spray for the Rottweilers, they love it.

    So, I don’t agree with Tim totally, I think the gas price may be the tipping point for many people. However, of course it depends on where the jobs are.

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  64. 64
    Dave Lincoln says:

    Also to Software Programmer: I don’t agree at all about the used cars. You can get something really decent for $4000 or less. So what if it goes down by 1/2 in 3-5 years that you own it? All my cars are from the early 90’s and older – they do fine if you can do a little work, and keep the car away from a shop (and especially a dealer) as much as possible. Do your oil changes, front brakes, radiator flush once in a while, spark plugs, etc.

    Oh, wait you can’t do that on a 21st century car! Maybe the computer will dial up the factory and they will download some software to rust up the bolts on you ;-) They don’t want you touching the new cars, and you can’t do much on em anyway.

    Actually, maybe I do agree – don’t get 8-10 year old cars; get something 15-20 y/o and you will be happier.

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  65. 65
    Greg K says:

    QUALITY OF LIFE

    I used to commute from Seattle to Redmond and waste 2+ hours a day (and my clutch) sitting in stop-and-go. Now I live in Fremont and commute to downtown, often carpooling or taking the bus (and driving as well). Now it takes 15min each way. I have a 12 mo old daughter and can spend an extra 1-1.5 hours with her in the evening. That’s worth a lot to me.

    I’ve put less than 2000 miles on my car this year.

    Living and working in the city is worth a lot to me, more than any gas savings. I don’t even think about the price of gas.

    Also (and I am NOT an environmentalist) they tell me it’s better for the “environment”

    Greg
    Seattle

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  66. 66
    Harley Lever says:

    TJ and LUC,

    Seattle has 470,698 of the 1,125,197 jobs in King County (2006 Data). “Downtown” might not be the job core, but Seattle as a whole accounts for 41% of the jobs in King County.

    Why do you think there are all those traffic jams coming into Seattle every morning and leaving every night?

    http://www.seattle.gov/oir/datasheet/economy.htm

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  67. 67
    NotaBull says:

    “Seattle has 470,698 of the 1,125,197 jobs in King County (2006 Data). “Downtown” might not be the job core, but Seattle as a whole accounts for 41% of the jobs in King County.”

    Amazing! Seattle only has 41% of the jobs in King County and it’s by far the biggest city in the county and the state as a whole. I’m amazed that’s it’s not more than that.

    Looking at that another way, it’s true to say that OVER HALF the jobs in King Country are not in Seattle! Insane in the membrane!

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  68. 68
    The Tim says:

    Well let’s be fair here. According to the 2000 Census, Seattle’s population makes up roughly 1/3 of the total for King County (582,454 people out of 1,737,034 total).

    So 33% of the people, 41% of the jobs. That would definitely indicate that there is room for more inward movement.

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  69. 69
    jon says:

    Prices are set on the margin, so as long as there is at least one more person who wants to move closer in than there are houses, prices will rise until the market clears.

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  70. 70
    deejayoh says:

    Interesting. % of population (Seattle to “Greater Seattle Area”) is falling faster than % of jobs in Seatle

    Year| %Jobs| %Pop| Ratio
    1980| 37%| 22%| 1.70
    1990| 33%| 19%| 1.73
    2000| 31%| 17%| 1.78
    2006| 29%| 17%| 1.75

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  71. 71
    deejayoh says:

    or in other words, gas prices would be reversing a trend that seems to have been in place for almost 30 years…

    Ask yourself: haven’t we had high gas prices once or twice since 1980? did things really change?

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  72. 72

    […] 24, 2008 · No Comments Tim over at the Seattle Bubble had a very interesting post today regarding whether it makes more financial sense to sell your […]

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  73. 73
    The Tim says:

    I just want to reiterate something, because in reading the comments it seems some people missed it.

    I agree that close-in neighborhoods have more value than those further out (though certainly not for everyone). As I said, I put a high value on my time, and would never consider living much more than 30 minutes from work (buy or rent). I also agree that there is a lot more to the calculation than gas prices alone.

    The reason I focused only on gas prices in this post is that gas prices have been the singular focus of news articles such as the ones I linked to. The point of the post is that gas prices are not likely by themselves to drive migration trends or hold up prices.

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  74. 74
    LUC says:

    HL,

    You would have to breakdown the 41% by income to determine who would be able to afford to live in Seattle. But I agree with Tim, gas prices are not likely by themselves to drive migration trends or hold up prices.

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  75. 75
    B&W Nikes says:

    DJ I was going bring up the major trend from the 1950s-1960s – dramatic flight away from cities – and justify something of a modest trend reversal in the mid 1990s. For the most part before the 1960s, the core urban areas grew at a much faster rate than the outlying areas. As an isolated Seattle question the actual numbers are a little surprising though.

    Your statement holds true for a perpetual trend of decline. Seattle as a % of total King County population since 1910 has been waning. The last era of major urban growth relative to the county was in the wake of the Gold Rush of the late 1890s (and the Panic of 1893).

    1890 66.9%
    1900 73.3%
    1910 83.3%
    1920 81%
    1930 78.9%
    1940 72.9%
    1950 63.8%
    1960 59.6%
    1970 45.9%
    1980 38.9%
    1990 34.3%
    2000 32.4%

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  76. 76
    biliruben says:

    NY Times article on this topic, centering on Denver:

    http://www.nytimes.com/2008/06/25/business/25exurbs.html?_r=1&hp&oref=slogin

    “Juanita Johnson and her husband, both retired Denver schoolteachers, moved here last August, after three decades in the city and a few years in the mountains. They bought a four-bedroom house for $415,000.

    Last winter, they spent $3,000 just on propane to heat the place, she said. Suddenly, this seemed like a place to flee.

    “We’d sell if we could, but we’d lose our shirt,” Ms. Johnson said. On a recent walk, she counted 15 sale signs. A similar home nearby is listed below $400,000.

    “I was so glad to get out of the city, the pollution the traffic, the crime,” she said. Now, the suburbs seem mean. “I wouldn’t do this again.””

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  77. 77
    asdfasdf says:

    “Harley give me a break — you must know some real, real STUPID people. You can rent a house in Mag or Ballard for less the 3k a month.”

    People who pay $3000 to rent a condo or apartment aren’t interested in renting a whole house in a quieter neighborhood. Craigslist is actually filled with such high-end rentals (though $3000 tends toward the high end of high end in Seattle). Here’s an example – http://seattle.craigslist.org/see/apa/731491622.html

    And no, they are not stupid people. They are people who make a great deal of money and can afford to pay for luxury and location and will do so.

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  78. 78
    TJ_98370 says:

    Tim,

    I see the possibility of some interesting polls suggested by this thread, such as;

    How many readers work downtown Seattle?

    How far is your daily commute?

    Would freeway accessible Dunkin Donuts and Starbucks outlets improve the commuting “experience”?

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  79. 79
    b says:

    If you care a whole lot about your time, avoiding commuting and traffic, using less gas, blah blah blah then you should probably rent forever. Buying something close in is not going to help much if you change jobs to Redmond, or vice versa.

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  80. 80
    jon says:

    Part of the situation in Seattle is that there has been a lot of job growth on the Eastside, which draws people who years ago bought in Seattle to commute east. The newer people in the area who can’t afford to buy in Seattle now have to drive in from further out to fill the jobs in Seattle, because so many Seattlites are commuting the other way.

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  81. 81
    Harley Lever says:

    The Tim,

    I agree that gas prices are not the sole factor when buying a house, but they can be compelling.

    I believe your assumptions are off for the following reasons:

    Americans will buy as much as they can afford. It seems more accurate to compare the amount of square footage $400,000 will buy in Marysville and Shoreline, then to think an American would actually spend $100,000 less.

    Let’s assume you buy a home in Shoreline for $400,000 but it is 25% smaller, but you reduce your energy expenses by 25% (assuming everything is equal). I am guessing $2000/year so you save $500/year in energy savings with a smaller house.

    Your calculations assumes only one car, when most home owners have two. Based on your example this would be $4320/year in fuel savings ($180/month X 2 Cars).

    This would save the family $4820/year in gas and energy costs.

    Other Money Saving Options For Urbanites:
    Because you live close in you may choose to just have one car which saves you:

    $6618.20/year car payments ($28,000 5-yr loan at 6.78%)
    $1500/year Insurance+
    $3360 for gas/year.
    = $11,478/year
    – $720 Bus Pass
    = Total Savings $10,758/car/year

    Looking at it from this perspective changes things drastically. The Urbanite has more cost saving options. Based on your assumptions and my modifications this will save almost $4,820/year. If the urbanites take the extra step and eliminate one car now they are saving over $15,000/year not including savings on car maintenance.

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  82. 82
    LUC says:

    Harley Lever,

    You need to include additional assumptions in calculation:

    1) Some companies (e.g., Amgen) in Seattle actually pay for employees bus and ferry passes. In addition, they provide vouches for gas, AAA and Brown Bear car wash for employees who use alternate modes of transportation. So estimates for gas, car maintenance and public transportation need to be modified. See link below see link below for reference:

    http://transit.metrokc.gov/cs/employer/empcommute.html

    2) Tim’s argument is based on data not assumptions. Your argument is based on assumptions, not data.

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  83. 83
    Garth says:

    softwarengineer.

    That is the biggest load of crap I have ever heard. I just sold a 4runner that had 175,000 miles on it when I bought it, and I drove it for 5 more years and it never had a single leak, or a repair that was even close to a 1/4 of the bluebook which was only $5000 when I purchased it. I put almost 60,000 miles on it, treated it like crap and still sold it for nearly half of what I paid.

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  84. 84
    Harley Lever says:

    LUC,

    Everything is based on assumptions and the data I provided was from Tim’s own example.

    I am pretty sure if I say black you will definitely say white.

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  85. 85
    what goes up comes down says:

    Harley, everything is good prices in Seattle will always go up, invest in real estate today and become rich, the sky is the limit, RICH I SAY.

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  86. 86
    LUC says:

    Harley,

    You only addressed one part of my response. In fact, you skewed your numbers with a 28K car purchase.

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  87. 87
    Harley Lever says:

    LUC,

    $28,000 is the average MSRP price for cars in 2008.

    LUC, the reason I do not respond to most of your statements is because you consistently cite the statistical out-liers as if they are the norm. You often make singular baseless points which do not merit a response.

    Most employers do not provide vouchers. You name three companies out of the three thousand and speak as if every company is doing it. You then do not consider how many of the employees actually use the system. The best part about it is that you actually prove my point in that living close in allows you to take mass transit.

    I used The Tim’s own figures to make my argument and you tell me that my information is wrong. I think that it is clear that you have a crush on The Tim and will do or say anything to defend The Tim.

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  88. 88
    LUC says:

    Harley Lever,

    In the first place I didn’t name 3 companies. What figures do you have to prove that most employers don’t supply vouchers? If you did a survey of the major high tech employers in the area you might find that they do support these transportation incentives, they receive a tax-break. Did you actually read my link.

    Second, I didn’t quote statistical outliers. Your the one that quoted average price of a car for this year. Did you happen to notice the sale of new cars are tanking?

    Your final comment shows your lack of maturity in defending your arguments.

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  89. 89
    Everett_Tom says:

    Hey Harley,

    I actually don’t have any problem with you numbers, but I think you might have missed the point of this post..

    as Tim said above:

    The reason I focused only on gas prices in this post is that gas prices have been the singular focus of news articles such as the ones I linked to. The point of the post is that gas prices are not likely by themselves to drive migration trends or hold up prices.

    In other words. I think a person could save more then just the cost of gas. However the insurance savings, cost of removing a car, car payments, etc.. are the same as they were before gas prices changed..

    I think your indignation is right on, that’s why the newspaper articles that claim gas prices alone will sustain or push up in town prices are silly. There are reasons to move in town, but a small change is gas prices isn’t going to push most people over that edge.

    ( Also – while I don’t know about anyone else, I know my wife and I are looking for a specific kind / type of house.. we wouldn’t be upping the cost just because we could afford more…. We’d much rather lower our payments and split the new “income” betweens savings and fun money…..)

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  90. 90
    Madrona says:

    I have to agree with the lion’s share of the responders. Tim’s calculations and assumptions are *painfully* over simplistic. How can we assume the average household only drives to get to work? What about other activities requiring driving?

    I would also argue that the closer to the city center, less households will have multiple vehicles. My wife and I live < 2 miles from DT, and we share one car successfully. There are two reasons we do this: closeness to amenities (shopping, work, etc), and where the hell would we keep another car?

    As someone else mentioned above, the distance to basically everything is reduced when living closer to DT. I can go to multiple grocery stores, work, shopping centers, Lowes/Home Depot (a requirement if you own), restaurants, theaters, and Costco all within 4 miles of my house.

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  91. 91
    Harley Lever says:

    Hi Everett_Tom,

    I do agree that gas prices alone will not force people to purchase a home closer in. I think the media does over simplify the issue.

    I do think that it will be an influencing factor. If gas prices increase further, it will play more of a role. My critique of Tim’s assumptions, with the exception of heating costs, did target gasoline-related costs. Not needing two cars is a great advantage economically. He assumed only one car which I felt was off. In addition, he did not account for driving other than work.

    I agree that some people are looking for a “specific house”. In my own experiences I looked for what I can afford and had an open mind to what that would get me… single family, condo, townhouse. Every home has pros and trade-offs. In general I think Americans go in looking for homes in a price range and see what they can get.

    Off the subject here is a great web site that scores the walk-ability of your home:
    http:///www.walkscore.com

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  92. 92
    Everett_Tom says:

    Thanks Harley,

    I think I may have seen that site making the rounds on a few other blogs a bit ago..

    I guess I still feel like your savings, while real, don’t change with gas prices. I.e. if gas prices were low, and I moved to a urban center, using your assumptions I could have saved the

    Other Money Saving Options For Urbanites:
    Because you live close in you may choose to just have one car which saves you:

    $6618.20/year car payments ($28,000 5-yr loan at 6.78%)
    $1500/year Insurance+

    in fact, if gas was free, I’d still save that money…

    Why does that matter? Only because the silly Newspaper articles suggest that people will now put a premium on in-town housing due to gas prices, which doesn’t wash, since the only thing that’s changed are the number’s listed above. (go ahead and double them.. and gas prices still arn’t enough in most cases to make this pan out..)

    Of course, that assumes that people can do basic math..

    I’m pretty sure this post was really just pointing out the lack of research that some newspaper articles have done.. but the comments seemed to wander out into the weeds.. :)

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  93. 93
    Harley Lever says:

    Hi Everett Tom,

    I agree with everything you say.

    Admittedly, I have trouble staying within the constraints of the argument. I look at any issue and see hundreds of deterministic factors. I feel that the conversation and the topics are more information rich and most importantly helpful when considering multiple factors.

    I think what changes with high gas prices is the psychology, values, and tolerances of renters and homeowners alike. Having the ability to shed a car more easily and reduce exposure to future gas prices and energy prices is appealing and when combined together becomes very attractive. Living away from your job and/or in the suburbs requires more driving and you cannot as easily shed a car and in general, you are in a bigger home. Being tied to potentially high fuel and energy costs is scary for a lot of people.

    I do concede that gas prices solely are not a factor.

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  94. 94
    what goes up comes down says:

    Hey Madrona, I don’t know if you know this or not but in case you missed something there are “shops and grocery stores” on the other side of the lake.

    Hey Harley, “Living away from your job and/or in the suburbs requires more driving and you cannot as easily shed a car and in general, you are in a bigger home. ” Again where are they Boeing plants located, how about Microsofts headquaters/ main campus. This will really blow you away — you can have a smaller house on the eastside also — it is not a requirement to have a McMansion to live across the lake.

    You guys really need to get out of Seattle — DT — and see some other parts of the world — I mean far away places like North Bend or Issaquah.

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  95. 95
    what goes up comes down says:

    Final point, it may come as a surprise too many, but I think the people who bought farther out ACTUALLY judge some other QUALITY of life aspects as being important. These people may have wanted a larger piece of land, a better school district, etc…. Oh that’s right Rainier Valley is safe and no crime happens in Seattle down in the Pioneer Square district — most of the bums/winos are out in North Bend if I remember correctly.

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  96. 96
    mikal says:

    If the jobs aren’t found in Seattle, why is there traffic coming into the city every day from North, South East and West? I agree that there are jobs in Everett and redmond. There are also alot of military jobs in Bremerton, Everett, and Fort Lewis. I reverse commute to Issaquah, North Bend, and everywhere in the Puget Sound region. I see it. The only other places that there is real traffic is on 520 going the other way and 405. Some of the 405 traffic is also headed to down town also. Why?

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  97. 97
    what goes up comes down says:

    Mikal, of course there are jobs in Seattle but there are more jobs outside of downtown. I mean the way some people talk here is that DT is where all the work is and only closer in can someone actually walk somewhere to shop. I agree if you live in the Burbs most likely you drive more than you walk but you know I believe that is because YOU CAN FIND FREE PARKING at those shopping areas. Tell me where in DT you can park for FREE.

    See Americans are funny it is all about convenience and easy compared to cost. If someone can walk 15 minutes or 20 minutes to the store but if they can drive in 2 or 3 minutes and know they won’t have to pay for parking most drive. If gas gets to be $6 you will see more people walking in the burbs or more likely biking.

    Let’s think why is Fast Food so popular in the US and not so much in Europe (given it is starting to gain traction) it certainly is not that the food is better but it is because it is not too bad, fairly cheap, and convenient — fast. Ad in the fact in the US you have to add the 20% for tipping at an actual restaurant and in Europe you don’t — basically round up. See conveneince and cost. And we all know at a certain point COST trumps everything — think about California and people commuting for an hour or more — fairly common so they can buy a house some where.

    If an equal house costs 1/3 in Issaquah versus Magnolia you would have to be a moron to buy in Magnolia — people will talk about how the house will go up in Mag more in the future — but those same people should think about the old saying DON’T put all your eggs in one basket. Investment is about DIVESIFYING.

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  98. 98
    what goes up comes down says:

    one more thing if all jobs are in DT why are you reverse commuting — get a job DT and you will be able to walk to work.

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  99. 99
    Everett_Tom says:

    I think what changes with high gas prices is the psychology, values, and tolerances of renters and homeowners alike. Having the ability to shed a car more easily and reduce exposure to future gas prices and energy prices is appealing and when combined together becomes very attractive. Living away from your job and/or in the suburbs requires more driving and you cannot as easily shed a car and in general, you are in a bigger home. Being tied to potentially high fuel and energy costs is scary for a lot of people.

    I’d agree that much of the market is moved by perception, though it’s bounded by some hard numbers (i.e. no matter what you think you can afford, the banks will only lend you so much .. [ that’s assuming you don’t look at 2001 -> 2007] )

    Shedding a car would be nice no matter where you live (assuming no major quality of life hit.)… of course that assumes that both car users have their jobs close to each other.

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  100. 100
    NotaBull says:

    “You guys really need to get out of Seattle — DT — and see some other parts of the world — I mean far away places like North Bend or Issaquah.”

    I completely agree. Some people who work and live in Seattle seem to think that everything is in Seattle.

    For example:

    Madrona said: “As someone else mentioned above, the distance to basically everything is reduced when living closer to DT. I can go to multiple grocery stores, work, shopping centers, Lowes/Home Depot (a requirement if you own), restaurants, theaters, and Costco all within 4 miles of my house.”

    This distance to “everything” is reduced when living to downtown. Maybe, but downtown isn’t the only place in the area where this is so. I live in Sammamish, and every single one of those amenities is within 1-6 miles of my house. OK, so I can’t walk anywhere without a 20 minute walk, but I don’t like walking along sidewalks next to cars anyway – I’ll save my walking for the backcountry. I never understood what was so appealing about walking to Safeways in the rain in November so I could drag back a few bags of groceries. I rarely did it when I lived on Capital hill because it sucked so much.

    My Safeway is about a mile and a half away, and takes maybe 5 minutes to get to. In the process, my PNWSUV (Subaru) gets about 23 MPG for that kind of driving. OMG – that cost me 60 cents! Let’s call it a buck. A BUCK to get to the store and back. Oh no!!! I’ll have to buy Safeways gruel instead of the name brand gruel! HORROR!

    Yes, Seattle has a lot of jobs. 41% of the jobs in King County, apparently. But head out of downtown for a second and you’ll see jobs, restaurants, shops, and, yes even Costco! (the headquarters in fact).

    Being near the city has many advantages, like a much wider selection of restaurants and a generally higher proportion/density of jobs. However, that doesn’t mean there are zero jobs, restaurants, or anything else once you step outside of the Seattle Bubble. (pun intended)

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  101. 101
    Madrona says:

    NotaBull – But I thought the impetus of this post was to note how conservative gas usage would or would not make housing near the city core hold value? Not that driving to the store would only cost $0.60 a trip.

    On a semi-related note… those living closer to Seattle can use Amazon’s wonderful new service: AmazonFresh (www.amazonfresh.com). Groceries, fresh produce, meats, dairy, and frozen goods all delivered to your doorstep. Moreover, there is free shipping on orders greater that $25. That solves the shopping in November rainstorm problems…

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  102. 102
    NotaBull says:

    “NotaBull – But I thought the impetus of this post was to note how conservative gas usage would or would not make housing near the city core hold value? Not that driving to the store would only cost $0.60 a trip.”

    I was just responding to your comment that seemed to imply (perhaps inadvertently) that it was necessary to live near downtown in order to utilize the nearby amenities that you referenced. My point was that you *don’t* in fact need to live nearby downtown in order to utilize those amenities and my own example was used to demonstrate that.

    “On a semi-related note… those living closer to Seattle can use Amazon’s wonderful new service: AmazonFresh (www.amazonfresh.com). Groceries, fresh produce, meats, dairy, and frozen goods all delivered to your doorstep. Moreover, there is free shipping on orders greater that $25. That solves the shopping in November rainstorm problems…”

    Yes, I used that service while living in Madrona. Not you, the neighborhood. :)

    I liked it a lot, especially the part where you can order late at night and get all the deliveries by 6am. I’m sure that over the years as it expands and becomes more popular, it will start up in other areas too.

    Brief research indicates that they didn’t deliver to West Seattle, until they started to. Oh, and I just went on their website and found that they deliver to my old address in Issaquah! They don’t deliver to me yet (North Sammamish), but I’ll let you know when they start to. It seems that in some outer neighborhoods (Redmond, Issaquah, South Sammamish) they have a requirement to be a “prime” member which amounts to a $80 annual fee. I wonder if this is essentially a fuel surcharge due to the distance from the Bellevue fulfillment center they have. Yes, Bellevue.

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  103. 103

    […] realized we have beat the subject to death with a pair of posts and this week’s poll, but I had to at least point out a Rhodes piece in today’s Seattle […]

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  104. 104
    Tomas Renskin says:

    Sounds like the central banking families (the elites) have a plan to get Americans to move close to the cities. Maybe the Rockefeller family is going to use all of their decades of population control experience to release one of their homemade viruses, once we are all conveniently packed together like sardines.

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  105. 105
    Maia says:

    I agree. As someone with no car and unable to afford driving lessons (£20+/hr in UK, min wage £5.65) let alone a car, the cost of bus and train really limits my work choices (chocolate shop job). Everyone there doesn’t drive – people who can work out of town. If you have a car, you’re hired in more remote areas. Gas is not important if it’s the reason you can have a job in the first place.

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  106. 106

    […] Will High Gas Prices Save Close-in Neighborhoods? Pretty much any way you slice it, the higher cost of housing close-in far outweighs any financial […]

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