I 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 Times on the issue of gas prices and home buying patterns: Will gas prices drive homebuyers away from suburbs?
The article starts off with an anecdote about a couple of people that currently rent a condo in Kirkland, but allegedly decided due to high gas prices to buy a townhouse in Seattle (presumably around Capitol Hill Update: see below). Unless they’re seriously downgrading the size of their living space, I don’t see how that could possibly pencil out to spending less overall.
A Portland economist predicts that buyers soon will choose where to live based on what they would spend for gasoline.
That, eventually, will devalue suburban housing while strengthening in-city home prices, says Joe Cortright, whose Portland consulting firm, Impresa, recently released a report saying as much to U.S. mayors.
“The new calculus of higher gas prices may have permanently reshaped urban housing markets,” said Cortright, a senior fellow at the Brookings Institution, a nonprofit Washington, D.C., think tank. “What this really means is that as people move, they’re going to look for places that enable them to drive shorter distances and avoid places where they have to drive a lot.
“I expect this to be a subtle process. I don’t expect everyone to put their suburban houses on the market all at the same time.”
I agree that driving less is an important factor, but I still don’t see how it makes sense financially when you factor in the more expensive home prices “closer in.”
Cortright says he’s starting to see proof of change in cities nationwide — from Los Angeles to Pittsburgh, from Tampa to Seattle.
“Statistically, home prices are down more in the most distant suburbs and still relatively strong in the closer-in neighborhoods,” he says. “The closer you are to downtown Seattle, the stronger the single-family residential market is.”
“The thing we heard was, ‘Drive until you qualify’ [for a mortgage] because real estate is less expensive the further out you go,” Cortright says. “So if people would put up with a longer commute, they’d have the opportunity to be able to afford a place.”
Just so I can get this straight, the argument appears to be:
- People bought in the suburbs because it was cheaper than closer to the city.
- With high gas prices, that discount is eliminated.
- This will drive people away from the suburbs toward the cities.
- Therefore, home prices will fall more in the further out suburbs and less in the close-in neighborhoods.
Am I the only one that sees a problem with this logic? Wouldn’t the end result still be that buying in the suburbs would be more affordable than buying close to the city? I still don’t see a convincing argument that gas prices alone will significantly change people’s home-buying habits.
One last time, for the record: I’m not saying that there aren’t a lot of convincing reasons to want to live “close-in.” I’m also not making some sort of general statement about the overall economics of living further out. Articles such as these are making the claim that gas prices alone will drive people into more expensive in-city real estate. I’m simply saying “prove it.”
(Elizabeth Rhodes, Seattle Times, 07.07.2008)
Update: My bad, I didn’t pay enough attention to the very end of the article where it placed the anecdote buyers in the Roosevelt neighborhood. I just caught that they were moving “as close to their jobs as possible” and that one of them works at Seattle Central Community College on Capitol Hill. Not that it makes that much difference in home price.