Rising gas prices, declining suburbs

A while back I posted a lengthy bloviation arguing the housing bust will hit much harder in far-flung suburbs. Update: A new study argues that, not only will suburbs be harder hit in this downturn, but also that rising gas prices were the tipping point that caused the housing bubble to burst.

"The gas price spike popped the housing bubble," according to a new report from the group CEOs for Cities, which adds, "Growth in housing prices was fueled by low and stable gas prices from 1990 through 2004."

More: "Although housing prices are in decline almost everywhere, price declines are generally far more severe in far-flung suburbs and in metropolitan areas with weak close-in neighborhoods. The reason for this shift is rooted in the dramatic increase in gas prices over the past five years."

The report concludes, "The rise in gas prices has fundamentally altered the landscape of urban housing markets in a way that will not quickly be undone, barring an unforeseen collapse in oil prices."

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: "She's real fine, my $4.09," submitted by Pete to the "Pain at the Pump" album on Your Scene at latimes.com.

Comments

[prefab sprout]

The price of gas may effect future behavior but it had NO effect on the housing bubble bursting. Its well documented the no cost/no skin in the game loans combined with easy qualifying caused the problem. If the proponents of this theory are correct then Downtown and Highland Park real estate must be holding their values. Oh they arent? Oh well.....back to the drawing board!

[tarbubble]

why don't more businesses relocate to the "exurb" areas where housing is cheaper? when Riverside County was agitating (may still be agitating) for a tunnel to be dug underneath the Santa Ana mountains in order to increase traffic flow into Orange County, i always wondered why they didn't just pour their dollars into attracting businesses. i know everybody here knocks the IE, but i grew up out there and love it and would live there if there were any jobs for us (electrical engineering). but we chose to live near work, so we're stuck in overcrowded and overpriced south Orange County. everybody talks about the culture and the entertainment and the gloriousness of the coastal areas but for those of us who can't afford any of that crap the glamour seems pointless. at least from the IE i could take the metrolink into the city and see a concert every once in a while - since the cost of living in the IE would free up a little money for cultural enrichment. we just can't deal with 4+ hours of commuting every day and the attendant fuel costs. arrgh, now i'm getting frustrated again.

[MyLessThanPrimeBeef]

This just in: Raising rice prices are driving people to the Sacramento-San Joaquin Delta.

When is the next wagon to South Dakota? I am kind of short on wheat.

[RZ]

Everyone's been complaining about rising gas prices since at least 2000. So why are the higher prices just now being blamed for the slumping housing market? Sure, higher costs - whether gas, food, household needs, etc. - didn't help the housing market. But it doesn't change the fact that too many people made financially irresponsible decisions to buy homes they couldn't afford in the first place. Most of the current defaulters would have had to foreclose no matter what the gas prices are.

[LA]

Those of you who are pointing out positive opportunities emerging from this mess - thank you!

We are going to see growth in public transportation, electric cars, hydrogen fuel cell research and development, solar power systems, and many other innovations that will arise to fill our needs. When ANY sector of a market becomes too expensive, or monopolized, or antiquated, it creates opportunities for someone to do it faster, better, cheaper.

This is an exciting time. The future is gonna happen. It's our own fault if we get dragged there kicking and screaming when we could be enjoying the ride.

[Teresa]

1Mile, the gas prices are background noise to my husband and me as well. He telecommutes, and I take the train to Philadelphia every day. I drive to and from the train station (about 5 miles round-trip), and to stores and other errands. I gas the car about every 10 days.

I disagree with Tealeaf that all the jobs that can be telecommuted already are. While some jobs can never be telecommuted, an awful lot that could are not, specifically back-office work such as data entry.

The simple fact is, we are running out of oil. We have enough to last about another 40 to 50 years at best, even if we drill the wildlife refuges. The days of cheap gas are over.

Tarbubble writes:

---------why don't more businesses relocate to the "exurb" areas where housing is cheaper?--------

As gas prices continue to rise, making it more and more difficult and costly to attract employees, they will. They'll also start telecommuting as many jobs as can be telecommuted. However, these things will not happen overnight, but gradually, over the next decade.

-------------everybody talks about the culture and the entertainment and the gloriousness of the coastal areas but for those of us who can't afford any of that crap the glamour seems pointless.---------------

That's why we left So Cal. The fact that it was nice outside (at least in the winter--in the summer it's as bad as Philadelphia) and that there were all these great museums, fine restaurants, etc., meant absolutely NOTHING when we couldn't afford to go anywhere or do anything, anyway.

[Milla]

prefab: i said in the "next five years." in case you've missed the headlines, everything is losing value nowadays. but as you said yourself, "The price of gas may effect future behavior..." [sic]

[JohnnyB]

CEO's For Cities PROMOTES urban-centric life and development. That's their power base.

Think back to a 1 1/2 - 2 years ago, when the bubble popped... we (the populace) were not really thinking about gas prices the way we are now. Gas and commodity prices rose on the heals of the RE collapse. So, they have it backwards.

The CEO's are manipulating people's short term memory span to frame the debate in favor of their power (revenue) base. This form of opportunistic urban promotion will lead to funding initiatives and developments that will be urban centric at the expense of suburban and rural life.

This is an unbalanced, misguided approach that would tend to further degrade the strength and prosperity of our individual citizens and our individual rights - especially in terms of quality of life, peace of mind, self determination AND IMPORTANTLY – LAND AND PROPERTY OWNERSHIP.

This is a big, beautiful, prosperous country. We shouldn’t promote living on top of each other like sardines because big oil runs our government. We should promote alternatives to big oil to promote quality of life and a healthier planet.

Hey, I love cities too… absolutely. But, balance is key.

[tealeaf]

why don't more businesses relocate to the "exurb" areas where housing is cheaper?

Same reason business chose Manhattan over New Jersey: because executives choose the location of HQ. And they simply refuse to drive long distances. It's the cold, hard reality of the situation.

Regarding Teresa's disagreement, if a business is going to push data entry to a telecommuter, why push it to "overpriced" Colton when you can push it to Mexico, eastern Europe, India, or South Dakota?

Point is telecommuting will be broadly be reserved for marketing / sales types because of industry's need for presence in other areas. The only exception, which is temporary, is a critical person who relocates out of state (at their old salary). I have rarely seen these sweetheart deals last more than a couple of years.

[yours truly, Johnny Dollar]

I was making Palm Springs-Hollywood-Palm Springs roundtrips; now, everything is backwards; so, I am now
making Hollywood-Palm Springs-Hollywood roundtrips.
Soon, a nice bicycle with panniers will be the new SUV.
(my backpack is my new briefcase).

[yours truly, Johnny Dollar]

Price of a pack of cigarettes when I was a kid was
25 cents; price of a gallon of gas when I was a kid
was 25 cents.
Now that I'm not a kid, the price of a pack of cigarettes
is $4.09; the price of a gallon of gas is now $4.09.
When I was a kid, the rule of thumb was a week's
salary bought you a man's dress suit; now that I am
not a kid.....nothing has changed.

[NoWayinLA]

This is a perfect example of the maxim, "correlation does not equal causation." Yes, the price of gas went up. Yes, the suburbs have the highest foreclosure and value decline rates so far. But the one did not cause the other. People are not suddenly deciding it's worth paying an extra $1800/mo in housing costs to save $100/mo on gas. They can't spend money they don't have.

The market fundamentals in LA and OC still don't make sense. Median incomes don't line up with housing prices. And families moving to LA also have to factor in the overwhelming cost of private school. In a lot of these exurbs, you can still send your kids to public schools. And the teachers even get paid.

Throw in some more quality of life issues... traffic is awful everywhere, hospitals are shutting down, air so thick with smog you can stir it with a spoon, freeway shootings, brush fires... it's a wonder anyone still lives in LA at all.

[yours truly, Johnny Dollar]

Living huge...as a former boss always said.
On a budget that would support no SUVs,
we have two; on a budget that would support
a rental; we have a five bedroom house a three
hour round trip from our workplace; on a budget
that would support 2 children, we have 5 children
(and two ex-spouses).
Keeping up with the Joneses? The Jones' two
cars are paid for (the Joneses are happy not having
anyone to keep up with).
Refer to lyrics in the song "Luckenbach, Texas"
with Waylon, Willie and the boys. Anyone talked
with Jerry Jeff Walker this evening?

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