Could Rising Gas Prices Kill the Suburbs?

Interesting article and the price of oil will definately impact things
in larger cities that have more commuting options available. But also
consider the source, which a real estate site and therefore looks at
real estate.

One thing they didn't take into account was that if oil goes up, people
will start trading in their SUVs for efficient commuter cars before
they start selling their houses. Also, you'll see more "flex hours".

Something to remember is that "the suburbs" were built in the days of
gas guzzling cars when oil was probably about what it is now, in real
terms (but housing was probably much cheaper).

But still, and interesting article.

Scott en Aztlán wrote:
> http://realestate.msn.com/buying/Art...42526&GT1=8479
>
> Could rising gas prices kill the suburbs?
>
> When a high-cost commute reaches the point of no-return, home buyers
> will start finding houses closer to work. In fact, some already are.
> By Marilyn Lewis
>
> Rising fuel costs are being blamed for everything from soaring utility
> costs to lower retail sales and higher airline tickets. And now,
> experts say high gas prices could reshape U.S. cities.
>
> "Most analysts believe that crude oil prices in the $50s and $60s will
> be with us for some time," says Stuart Gabriel, director of the Lusk
> Center, a think tank at the University of Southern California devoted
> to studying real estate forces and trends. There's even talk of crude
> hitting $100 per barrel -- or 10 times what it sold for in the summer
> of 2005.
>
> Once the realization soaks into the American consciousness that
> high-cost gas is here to stay, Gabriel predicts, those high commute
> prices will pull more homeowners -- even young families -- to live in
> central cities and create a push for more public transportation.
>
> City of the futu here, soon
> Gabriel already sees change in car-centric Los Angeles, where the
> commuter culture has for years pushed mile upon mile of city sprawl
> into neighboring towns and farmland. But now Gabriel says KB Home is
> leading the way to a new type of neighborhood.
>
> Once thought of as a first-home builder, KB in June launched KB Urban
> to develop high-density, mixed-use projects. The first such project
> will be a 2-million-square-foot complex of luxury hotels and private
> residences built in partnership with hotelier Marriott International
> and sports-and-entertainment company AEG, owner of L.A.'s Staples
> Center. This kind of development, Gabriel believes, will help make
> L.A. a denser, European-type central city. It is celebrated in a 2004
> film called "The End of Suburbia."
>
> "If you or I come back to Los Angeles 15 years from now, we are not
> going to see (the current) persistent pattern of building
> single-family detached homes farther and farther into the desert,"
> Gabriel says. Instead, he says, expect "a denser center city, denser
> inner-ring suburbs ... a city that is more vertical."
>
> High gas prices added incentive to in-fill
> In truth, the trend toward city living began before the oil-price run
> up, Gabriel says. But high gas prices are reinforcing the changes
> already begun by homebuyers reacting to congested freeways, long
> commute hours and the desire for a different kind of life.
>
> In San Jose, Calif., builders have clustered attractive condominium
> developments at and around light-rail stations as the system was built
> and expanded. An example of transit-oriented development, planners
> have expected for some time that high commute costs would create a
> market for such homes.
>
> Walter Molony, spokesman for the National Association of Realtors,
> says that the gas-price spike is still too new to have generated much
> in the way of hard data. But if one informal Web survey is correct,
> commuter wariness looks like it could soon shape home-sales trends. At
> HomePages.com, 45% of 2,000 readers polled during one week in May
> agreed that gas prices were "very important" to them in choosing a
> home. Among the most-important factors in a home location, a short
> commute was second only to a safe neighborhood.
>
> Gas prices shape the hunt for homes
>
> How important have rising gas prices been in how you think about where
> you want to live?
>
> Very important 45%
> Somewhat important 25%
> Not very important 11%
> Not important at all 6%
> No change 13%
>
> Which factors are most important to you when choosing where to live?
> (Check all that apply)
>
> Safe neighborhood 74%
> Short commute to work 40%
> Close to good schools 39%
> Close to parks, water or other recreation 24%
>
> Source: May 2006 Web site survey at HouseValues.com consumer sites,
> including HomePages.com and JustListed.com.
>
> When market research experts from Kelton Research performed a similar
> survey in 2005, only 8% of the people who responded rated a short
> commute as important, says Hugh Siler, of HouseValues.com, which owns
> the HomePages site.
>
> A shorter commute
> Matt Loose, 28, and Dana Loose, 29, chose their first home -- in the
> close-in Denver suburb of Centennial -- with an eye to keeping their
> commutes as short as possible while fulfilling their dreams of owning
> a brand-new home. They recently closed the sale of their $250,000,
> three-bedroom, two-and-a-half bath home in a KB Home development
> called Village at Centennial.
>
> "The main driving force behind our move was the convenience of the
> commute, as opposed to moving to a location that is farther outside of
> the metro area," said Matt. The new home is near a park-and-ride lot
> and a soon-to-be-built light-rail line, which will give him a
> 30-minute commute to his job as a civil engineer in nearby Englewood.
> Dana, a meeting and hospitality specialist, will be able to get to her
> job at a downtown Denver law firm in about 30 minutes.
>
> While they won't be able to walk to work, many of their contemporaries
> are driving 45 minutes to an hour, to new subdivisions being built on
> farmland. "We really liked the surrounding neighborhood," Matt says of
> Centennial, "and we liked the fact that it wasn't way, way out in the
> middle of nowhere."
>
> The economics of suburbia
> Economist Jack Lessinger points out that suburbia not only depends on
> autos for commuting to and from jobs, but that everything in the
> suburbs -- from stores to schools to restaurants -- requires
> increasingly expensive trips in cars. Lessinger is the author of
> "Penturbia: Where Real Estate Will Boom After the Crash of Suburbia."
>
> "Suburbia is full of far-flung destinations," says Lessinger. "It was
> oriented as a place where they could sell more goods and services,
> with shopping centers and subdivisions everywhere. It really maximizes
> the use of cars. It makes sense that, with high gas prices, the
> more-distant places are going to be hit the most." Like Gabriel,
> Lessinger predicts that the shape of communities to come will be
> circular and concentrated, and dictated by the need to conserve, where
> "the suburban plan is here, there and everywhere."
>
> Young families may have previously been lured out of cities in search
> of big back yards for the kids, but driving their flight to suburbia
> were escalating house prices in cities and the relative affordability
> of new subdivisions at the edge of towns.
>
> Trading miles for mortgage dollars
> But with the cost of gas hovering around $3 per gallon on average in
> the U.S., it's worth considering whether a shorter commute would pay
> for the incremental cost of a more expensive in-city home.
>
> Assuming a full-time job, $3 gas, 26 mpg and 50 cents a mile for
> maintenance and no parking fees, a 50-mile roundtrip commute costs
> $646.15 a month, or $7,753.80 a year, according to the City of
> Bellevue, Wash.'s, Commute Cost Calculator.
>
> Moving closer to work boosts your house-buying power. Everything else
> being equal, a 10-mile, roundtrip commute costs just $1,550.76 yearly
> -- saving about $6,200 per year, or $517 monthly. That can add about
> $80,000 to the total amount of a mortgage loan, says one Chicago
> lender. The rule of thumb: Each $250 a month you can free up for
> mortgage payments equals roughly $40,000 more you can borrow at
> current rates (using the recent national average of 6.5%), says David
> Kasprisin, district sales manager for National City Mortgage Co. in
> Chicago.
>
> Of course, if you're driving to work in a city, you're likely to pay
> up for parking. But even factoring in $200 per month for those fees,
> you'd still save $3,800 a year with the shorter commute -- good for at
> least another $40,000 on your mortgage. And chances are city living
> would make public transportation a viable option. Taking the bus -- in
> Bellevue, at least -- cuts the cost of the commute to between $600 and
> $1,000 per year, depending on whether you need a one- or two-zone bus
> ticket. This puts your savings back up around $558-$590 per month.
>
> Kasprisin says it's not hard to make the argument to his underwriters
> that a low-commute applicant should get a bigger loan: He says, "Look,
> these people live near public transportation, you can take that into
> account. We're pretty flexible and look at the entire person's picture
> for getting their loan approved. We're not just looking at
> debt-to-income ratios; we're looking at a whole mixture."
>
> Additionally, Gabriel predicts that "in-fill" developments eventually
> will make city living even more affordable. The key is building homes
> closer together -- say, 20 units on a site, rather than five, he says.
> Such homes are smaller than suburban homes, but closer to work and
> priced right.
> --
> I'm a wreckless driver and damn proud of it!