$4.00+ Gasoline – High Enough to Make You Move?

It’s official, over the weekend AAA (the American Automobile Association) reported the national average price for a gallon of unleaded regular gasoline was over $4.00.  Morning news programs jumped on the news rolling out any number of financial experts to predict where the cost of gasoline will be in the next 90 days.

While we are seeing significant drops in the number of gallons of fuel pumped each month, I wonder where the price must be to change lifestyle decisions of the American public.  We are already seeing Ford F- Series truck sales volume drop by 30% and Honda Civic sales volumes increase by over 30%.  We are also seeing a number of “choice” transit riders increase because due to the price increases they no longer consider commuting by public transit a choice. 

Changing the type of vehicle you drive and how you commute into work are significant decisions but do not have as big an impact as the decision on where to buy a home.  If you choose to purchase a home in an urbanizing area near your place of employment (and shopping and amenities) you will reduce your commuting costs but you may have to give up the large yard and other suburban benefits.  The market generally places a higher premium on those homes closer in, so you may have to accept a smaller house if you choose to live in the urban area.

The New Urbanists would argue the large yard would require additional gasoline to keep the grass cut and the larger house may cost more to heat and cool.  These are all soft costs that home buyers should (but do not always) consider when making their purchase decisions. The benefits to urban living are many and for a growing cohort in our community the pros out weigh the cons for this lifestyle change. 

While I continue to hear experts anticipating a seismic shift in the market toward urban living, the numbers as yet do not bear it out.  According to June 16, 2008 BusinessWeek article on vacation driving, a car driving 278 miles has seen a real increase in gas prices of $7.74 in the last year.  If driving an SUV the same distance the increase is $10.30 over June 2007 prices.

The cost of fuel is on the minds of home buyers but until it becomes significantly more expensive, we have not yet reached the economic tipping point. Once the tipping point is reached and sustained (likely $7.00+) then we may see significant relocation and a truly market driven change in human settlement patterns.