{"id":32626,"date":"2022-08-16T13:00:19","date_gmt":"2022-08-16T20:00:19","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=32626"},"modified":"2026-04-16T01:00:24","modified_gmt":"2026-04-16T08:00:24","slug":"will-gas-prices-affect-the-housing-market","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/will-gas-prices-affect-the-housing-market\/","title":{"rendered":"Will Gas Prices Affect the Housing Market?"},"content":{"rendered":"

The U.S. housing market is undergoing a rebalancing. Visit\u00a0HomeLight’s 2022 Housing Trends Hub<\/a>\u00a0for information on how to navigate a shifting market \u2014 whether you’re a seller, buyer, or homeowner.<\/em><\/p>\n

In 2008, just as the housing boom went bust, gas spiked from $1 to the record price of $4 a gallon.<\/p>\n

(That \u201chigh\u201d price would be a bargain today, as the average price in California hovers around $5.38 at the pump and even in gas-producing states such as Oklahoma $3.56 is the norm.)<\/p>\n

As the cost of their commutes zoomed up, many homeowners who strategically made the most of \u201cdriving to qualify\u201d \u2014 trading a longer commute to get more for their money in the suburbs \u2014 were suddenly struck with buyer\u2019s remorse.<\/p>\n

Some doomsday forecasts warned suburban communities could become slums as Americans flocked back to cities.<\/p>\n

Twenty-three years later, we\u2019re again seeing historically high home prices and astronomical increases at the pump.<\/p>\n

Thankfully, it\u2019s not exactly deja vu. The lessons learned<\/a> from that terrible crash have led to improvements in the practices of real estate companies, lenders, and consumers.<\/p>\n

But the question remains: How do gas prices<\/a> affect home buyers and sellers?<\/p>\n

Not surprisingly, the answer depends on your household income, where you work and live, and your goals and priorities including whether you\u2019re looking for a quick sale or considering a home as a long-term investment, etc.<\/p>\n

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Buyers unlikely to be affected by higher gas prices<\/h2>\n

Because they have a lower usage rate of gasoline or access to greater resources that allows them to absorb cost-of-living increases, these individuals and families are unlikely to be affected by higher gas prices:<\/p>\n

Established buyers with existing home equity and other resources<\/h3>\n

Typically, buyers who have a solid credit history, a fair amount of equity in a home they plan to sell or other financial resources don\u2019t base buying decisions on the cost of gas.<\/p>\n

For example, \u201cMany buyers who downsize sell their previous home with a bunch of equity,\u201d explains top-performing Tulsa, Oklahoma, real estate agent Luke Rentz<\/a>, \u201cso they\u2019re able to pay cash for their next home.\u201d<\/p>\n

The market for vacation or second homes doesn\u2019t usually see much of a change in demand based on gas prices. While the cost of travel has increased along with inflation<\/a>, \u201cA lot of the people who buy vacation homes are in your upper echelon of income producers,\u201d says Luke Rentz. \u201cThey can afford to take the hit or pay a little bit additional for gas.\u201d<\/p>\n

Buyers who need to buy a home for relocation or other reasons<\/h3>\n

For example, after Oklahoma legalized marijuana in 2018, the state\u2019s low cost of living and affordable home prices enticed several businesses in the industry and their employees to move from California and Colorado.<\/p>\n

Besides relocation packages offered by their companies, some families may have benefited from selling their previous homes in a more expensive market. \u201cThose buyers are unlikely to be deterred by gas prices from buying a home,\u201d Rentz says.<\/p>\n

Buyers who drive electric vehicles, work from home, or home school<\/h3>\n

Historically, a home\u2019s proximity to work was a major consideration for many prospective home buyers.<\/p>\n

While that feature remains important for essential workers who must go to a job site, that priority has changed for a significant number of buyers.<\/p>\n

Between the Great Resignation<\/a>, the work-at-home trend, and the small but significant number of electric vehicle owners, a greater number of Americans don\u2019t need gas to get to work. So, they\u2019re less vulnerable to changes in gas prices and may be able to allot more of the family\u2019s budget to a mortgage payment.<\/p>\n

In February 2022, approximately six in 10 workers <\/a>reported their jobs can be mainly done from home.<\/p>\n

In 2021, according to the U.S. Bureau of Labor Statistics<\/a>, over 47 million Americans voluntarily quit their jobs<\/a> \u2014 an unprecedented mass exit from the workforce.<\/p>\n

In addition, according to Cox Automotive<\/a>, the sales of electric vehicles rose 66% over the previous year. And between January and July 2022, shopping for EVs rose 73%<\/a>.<\/p>\n

The less time buyers spend in the car, the less the buyer may be concerned about gas prices.<\/p>\n

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Sellers who might be impacted by rising fuel prices<\/h2>\n

However, even if they\u2019re working from home or commuting in an electric vehicle, the home\u2019s proximity to the center of the family\u2019s life \u2014 school, relatives, work, house of worship or recreational space, city center \u2014 may be an important consideration in any home purchase.<\/p>\n

There are also sellers who may be impacted \u2014 negatively or positively \u2014 by high gas prices.<\/p>\n

Sellers of suburban homes<\/h3>\n

In 2008, the rise in gas prices compounded the problems of the housing market, and home prices sank in the suburbs. However, those suburban homes that were close to public transportation actually maintained or increased in value.<\/p>\n

That trend may be poised for a comeback.<\/p>\n

With gas prices rising, the New York City subways, D.C.\u2019s Metrorail, and San Francisco Bay Area\u2019s BART recorded significant increases in ridership<\/a> as early as March 2022.<\/p>\n

Furthermore, even before gas prices surged, the National Association of Realtors\u2019 (NAR\u2019s) 2022 Home Buyers and Sellers Generational Trends Report<\/a> showed that 32% of younger Millennials (ages 24 to 32) considered commuting costs to be the most important environmental feature.<\/p>\n

Now, they can deploy online calculators<\/a> to figure out real-time commuting costs almost instantaneously.<\/p>\n

Regardless of whether or not the cost of driving to a major city is outrageous, walkability and proximity<\/a> to public transportation, schools, libraries, groceries, shopping and other places of interest are always important factors in the desirability and marketability of suburban homes.<\/p>\n

Sellers of urban homes or homes near the city center<\/h3>\n

In 2008, it was widely reported that suburban homes that commanded $550,000 at their peak were being listed for $350,000<\/a> \u2014 a 30% reduction in price.<\/p>\n

However, while less likely to grab headlines, the median prices of homes inside the city quietly rose 3.5%. Buyers may be willing to pay a premium for homes close to or in town.<\/p>\n

So, higher gas prices may indeed have a silver lining for city sellers.<\/p>\n

Sellers of energy-efficient homes<\/h3>\n

In a recent NAR survey, 63% of Realtors\u00ae<\/a> said promoting a home\u2019s energy efficiency in listings was a very or somewhat valuable marketing tool.<\/p>\n

In fact, NAR\u2019s 2022 Home Buyers and Sellers Generational Trends Report<\/a> found heating and cooling costs and windows\/doors\/siding were the most important environmental features for 30% of home buyers.<\/p>\n

In states with higher heating oil and utility costs \u2014 brutal winters and sizzling summers \u2014 heating and cooling expenses might cause some buyers to balk at purchasing a bigger home.<\/p>\n

Conversely, sellers\u2019 homes that feature updated energy-efficient features that decrease cooling and heating costs have great potential to wow cost-conscious buyers.<\/p>\n

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Potential and current homeowners most likely to be impacted by gas prices<\/h2>\n

This year, Rentz, who works with over 80% more single-family homes than the average Tulsa agent, has yet to experience a direct correlation between gas prices and the housing market trends.<\/p>\n

However, \u201cbecause you drive by the numbers every single day,\u201d he says, \u201cchanges in the price of gas is one of the easiest ways to gauge inflation.\u201d<\/p>\n

In addition, watching the cost of essentials such as food and gas rise, \u201cfeeds into the broader worry of where we\u2019re moving as an economy and as a nation.\u201d<\/p>\n

The high price of gas and cost-of-living increases may not intimidate established or cash buyers from entering the housing market.<\/p>\n

The buyers and sellers who are vulnerable to a spike in gas prices are ultimately those who are also most impacted by inflation including:<\/p>\n

Low-income and first-time buyers<\/h3>\n

The market is definitely changing<\/a>.<\/p>\n

Rapidly rising mortgage rates<\/a> and the country\u2019s highest inflation in four decades have zapped the purchasing power of potential buyers.<\/p>\n

However, Rentz says, \u201cGas and other price spikes have shifted many lower-income and first-time buyers into conservation mode,\u201d he says \u201cThey’re cutting expenses and being more careful because there’s a little bit more economic uncertainty.\u201d<\/p>\n

Having nearly doubled from a year ago, the traditional 30-year fixed mortgage now hovers between 5% and 6%<\/a> \u2014 the highest it\u2019s been since 2009.<\/p>\n

The result is fewer buyers are able to afford the home they want. Not surprisingly, by June 2022, mortgage applications fell 21%<\/a> from the previous year.<\/p>\n

Buyers seeking new construction and those currently under contract<\/h3>\n

Consumers are not alone in bearing the impact of inflation. Builders\u2019 and contractors\u2019 timelines and bottom lines have been affected as well.<\/p>\n

Rentz now estimates the cost of all building materials has risen anywhere from 20% to 40%.<\/p>\n

However, \u201cThe biggest expense now,\u201d Rentz reveals, \u201cis the actual labor.\u201d<\/p>\n

In addition, since the pandemic began, everything from appliances to windows has been in short supply and getting more expensive<\/a> seemingly every day.<\/p>\n

Since January 2021, the National Association of Home Builders<\/a> reports price increases in:<\/p>\n