Will Gas Prices Permanently Alter Suburbia?

Rising energy costs are being blamed for everything from soaring utility costs to lower retail sales and higher airline tickets. And now, experts say the high gas price issue could reshape the U.S. housing market altogether.

“Most analysts believe that crude oil prices in the $50-60 range will be with us for some time,” said Stuart Gabriel, director of the Lusk Center, a think tank at the University of Southern California that studies real estate forces and trends.

Soaring energy costs have been in the news for months, and it’s not looking like that trend is poised to change. There’s even been speculation of crude hitting $100 per barrel — or 10 times what it sold for in June 2005.

Once the realization soaks into the American consciousness that high gas prices are here to stay, experts predict, those high commute expenses may pull more homeowners — even young families — to live closer or within U.S. cities and create a push for more public transportation.

In car-centric cities like Miami, commuter culture has for years pushed mile upon mile of sprawl into neighboring towns and rural areas. But now area developers are leading the way to new type of neighborhoods.

The trend toward city living began before the oil-price run up, analysts say. But high gas prices are reinforcing the changes already begun by home buyers reacting to congested highways, long commute hours and the desire for a different kind of lifestyle. Rising rates of Florida mortgage loans are yet another important factor.

Walter Molony, a 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 Internet survey is correct, the wariness of commuters looks like it could soon reshape home prices and sales trends.

At HomePages.com, 45 percent 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.

When market research experts from Kelton Research performed a similar survey in 2005, only 8 percent of the people who responded rated a short commute as important, says Hugh Siler, of HouseValues.com, which owns the HomePages site.

Matt Loose, 28, and Dana Loose, 29, chose their first home with an eye to keeping their commutes as short as possible while fulfilling their dream of owning a brand-new home. They recently closed on a $250,000, 3-bedroom, 2.5-bath single-family home in a new housing development.

“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 Loose said, noting that both he and his wife would be able to manage a 30-minute commute to their jobs.

While they can’t exactly walk to work, many South Florida counterparts are driving 45 minutes to an hour, as subdivisions being built on rural land further and further away from Miami as affordable housing gets harder and harder to find.

The economics of suburbia, which apply to vast swaths of Florida real estate, are in flux. Jack Lessinger, economist and author of Penturbia: Where Real Estate Will Boom After the Crash of Suburbia, points out that suburbia not only depends on automobiles for commuting to and from jobs, but that everything in the suburbs — from malls to school to restaurants — requires increasingly expensive trips in cars.

“Suburbia is full of far-flung destinations. 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,” Lessinger said.

The shape of communities to come will be circular and concentrated, he predicts, and dictated by the need for sustainable development. Right now, by contrast, “the suburban plan is here, there and everywhere.”

In the past, young families may have been lured out of cities in search of big back yards for the children, but also driving their flight to suburbia were escalating home prices in cities and the relative affordability of new subdivisions at the edge of town.

Yet in Palm Beach, Broward and Miami-Dade counties, the ‘burbs have caught up in price in many areas. And with gas hovering around $3 per gallon, it’s worth considering if a shorter commute would pay for the incremental cost of a more expensive in-city home and the Florida home mortgage that comes with it.

Crunch the numbers and you’ll see that moving closer to work may boost your chances of buying your first home:

• Assuming a full-time job, $3 gas, 26 miles per gallon and 50 cents a mile for maintenance with no extra parking fees, a 50-mile roundtrip commute would cost a South Floridian $646.15 a month, or $7,753.80 per year.
• Everything else being equal, a 10-mile roundtrip commute costs $1,550.76 yearly — saving about $6,200 per year, or $517 a month.
• That can add about $80,000 to the total amount of a home loan, according to one major mortgage lender.
• Effectively, each $250 a month you can free up for Florida mortgage payments equals roughly $40,000 more you can borrow at current rates, assuming a 30-year, fixed rate loan at 6.5 percent.

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 Florida home loan. By increasing borrowing power by that much, you reall open up your home-buying options. Chances are, urban living makes some form public transportation a viable option, too.

At present, however, most big developers are still focused on the traditional bread-and-butter suburban projects. The trick for consumers, then, is still finding that sweet spot between a shorter commute and affordability. For many, that means the suburbs are still in the running… but for how long?