Home > Blogs > Should you consider the price of gasoline both today and tomorrow when buying a house? I say yes. See why inside.
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Dan Chase's Blog

By Dan Chase | Home Buyer in Texas City, TX

Should you consider the price of gasoline both today and tomorrow when buying a house? I say yes. See why inside.

Should you consider the price of gasoline both today and tomorrow when buying a house? I say yes.


The last time gas went over $4 a gallon it caused the economy to crash. It would likely do it again. That one thing alone would likely drop house prices even more. 

There is another aspect many ignore. If I get 20 mpg in my car and gas is $4 a gallon that really costs me 20 cents a mile. But WAIT!!!. I drive both ways to work. So every mile extra cost me 40 cents. If I am looking at a house that is 20 miles away that is a cost of $8 per day, $40 per week, and (Rounded off by 4 weeks) $160 per month. That does not include oil changes, tires or repairs. We really need to double the cost of gas for repairs. It does cost close to $1 in repairs for $1 in gas over time. That would be $320 per month to drive. 

If instead I bought a comparable house that was only 5 miles from work the amount spent driving to work would only be 1/4 that amount. $320 / 4 = $80 a month. That is a $240 a month saving (plus the car itself) by moving 15 miles closer to work. 

I know, not many people look at it this way. But as gas gets more expensive more and more people will. It is likely that will drop house prices the further away from work people get. Now imagine what it would look like if gas went to $6 a gallon. Shocking isn't it?

It is very likely in the future as energy prices rise that people will move closer to work and shopping centers. That should increase the price of housing close to the metro center and decrease house pricing that is further away. The further away from town as energy costs increase the less desirable the property will become.

Comments

By Dan Chase,  Mon Mar 22 2010, 11:21
If gasoline gets to $4 a gallon compare the costs to when gas was $1 a gallon. Back then it would have cost 1/4 as much driving back and forth to work. That would have been $80 a month true cost.

When you compare that to $320 a month at $4 a gallon I am sure you can see how rising gas prices can make property further away less desirable. At a minimum it makes them much less affordable and thus should drop house prices the further away from the city center you get. It should also make housing prices higher the closer you get to the city center.

While it may not be happening a lot yet it is a very valid concern as prices go higher and potentially could stay there.
By Jennifer Fivelsdal,  Sat Mar 27 2010, 21:00
This is sure something that should be considered when purchasing a home. As a former long distance commuter I know exactly the point you are trying to convey.
By Dan Chase,  Wed May 19 2010, 12:31
Jennifer, this is an obvious thing. Yet many do not really consider the cost of transportation to work. They focus on the cost of the house alone. I wrote this hoping to show something many people may not have considered. Thank you for your reply.
By Courtney Cooper,  Wed May 19 2010, 12:36
Hi Dan - good post and very true - you should always consider commuting costs...
By Dan Chase,  Sat Jul 3 2010, 09:41
Yes, when gas was $1.25 a gallon it did not add up much. Now it sure does. I can even see house prices dropping literally by the mile if cap and trade is enacted. After all, that added expense could dramatically change the monthly payment that is the true cost of living and working from a given location.
By Dan Chase,  Mon Mar 5 2012, 13:40
This is even more important to think about now that $5 a gallon gas is being predicted in the next year or 2.

If gas costs $3 a gallon at 20 mpg that cost 15 cents per mile or $6 per day, $30 a week, and $120 a month which doubled to include repairs = $240 a month

$4 a gallon 20 cents a mile. = That would be $320 per month to drive.

If I get 20 mpg and gas is $5 a gallon that would cost me 25 cents per mile. With a 40 mile round trip drive that costs me $10 a day, $50 a week or $200 a month (rounded off to 4 weeks) multiplied to include repairs is $400 a month..

Is the house that is 5 miles closer to work and priced $5,000 more really more expensive or cheaper when you think about it? 10 miles a day going to work can add up quickly.

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