Green Leaf Report

When I bought my house about four years ago, we took advantage of the interest rate effect on home prices:  when interest rates are low, the monthly mortgage payment will be lower for a more expensive home. While the interest rate effect is established and known, a new factor coming into play is the energy price effect. 

Last weekend my family evaluated an out of state move for a new job opportunity.  As we drove around this other city with the real estate agent, we were firm- we don’t want a long commute, even if the house is cheaper.  Because, of course, the house then wouldn’t really be cheaper- the higher gas costs required for commuting would cause big increases to our monthly bills.  We’d rather spend more money to live close to the city center, where we can bike or walk to work.

I have to imagine this same conversation is happening with real estate agents around the country.  Energy costs should affect home prices in the far flung suburbs.  Even if interest rates are low, the required energy costs to access those homes daily adds a significant cost to the homes.  So the value of those homes is less in times of high energy costs than in times of low gas prices.

This also creates an interesting catch-22 for fuel prices: so many homeowners that bought new homes with long commutes now are unable to sell those homes for the prices they paid when gas prices were low.  So they sit on those homes, waiting for the market to turn, and drive long commutes with high gas prices.  By continuing to drive long commutes, those same homeowners are keeping the gasoline demand high, and helping keep gas prices high, which continues to depress their home values.  This is happening in million of households across America.

The gas prices certainly cannot be blamed entirely on Americans, but these practices are not helping to reduce the demand for oil and bring gasoline prices down.