Will gas prices drive buyers downtown?

My colleagues over at the Bottleneck blog posted an interesting item today asking if rising gas prices will make downtown real estate look more attractive:

"We've been hearing this for awhile -- mostly from developers. Suburban residents will move into urban areas because they can't stand their commutes anymore. There's been much debate about whether this is true. But the Wall Street Journal reports that gas prices might be doing what traffic could not:

'Abandoning grueling freeway commutes and the ennui of San Fernando Valley suburbs, Mike Boseman recently found residential refuge in [Pasadena]. His apartment building straddles a light-rail line, which the 25-year-old insurance broker rides to and from work in Los Angeles...' "

The Associated Press has a similar story, reporting, "Real estate agents, transportation officials and industry surveys indicate that home buyers are placing more importance on cutting their gas bills and commute times than they have since the oil shocks of the 1970s."

More, from the A.P.: "On Wednesday, a survey of 900 Coldwell Banker agents showed a remarkable 96% said that rising gas prices were a concern to their clients, and 78% said higher fuel costs are increasing their desire for city living."

One more, from LosAngelesGasPrices: The average price of a gallon of regular unleaded in L.A. is $4.61 Wednesday, up from $4.60 Tuesday.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo: Los Angeles Times

Comments

[Chris]

Yeah sure, to save $300 a month in gas I will give up a 2000 sq ft. house with a yard for the kids to live in a 900 sq ft "loft" with a $500/month HOA amongst drug dealers and absolutely no family oriented anything. Downtown LA is a long way from Urban Living. I just spent a week in Manhattan with my wife and realized the many many differences between the two cities. Parks everywhere (not just Central Park), total access to everywhere through public transportation, and a market, deli, chinese, italian, american, pizza, mexican resturaunt, pharmacy, chain store, hardware store, bookstore, bakery, bar within walking distance so you actually don't even need public transit to do anything except go to work! LA has essentially none of this. There is no comparison. BUT it would be cool to have all that and the great weather!!!

[IToldu2CashOut]

I'm a big fan of downtown, and have visited many of the condo projects there, but presently there are major issue with buying in the area:

1. Way overpriced. Buying downtown is a risky venture to say the least. Prices should reflect that. Instead developers want 500-700+ per square foot. This is just insane.
2. Pollution. Is it worth taking 20 years off your life and risking cancer?
3. Schools?...this should certainly be reflected in the price?
4. Crime and the homeless. Yes places are gated and have security, but can you really count on your neighbors to keep people out? I hear too many stories about cars getting broken into and all that, even in supposedly secure garages. The fact is something like 50-80 thousand homeless people live in the area. Nothing against the homeless, but being harassed by people who should really be in an insane asylum gets old after awhile even if they are relatively harmless.
5. Transportation infrastructure is getting better all the time but still along way away from being comprehensive. The subway to the sea is sort of the holy grail that will make downtown work and that could be 20 years away or could be 8 (if people start to demand it), theres no way to know for sure.

Bottom line though is prices needed to reflect the current slow state of gentrification which means they should be closer to 200 sf instead of 500 sf, until that happens its just to risky for my blood. I'd rather rent a place 28 blocks from the beach for a 1/3 of what my mortgage would be downtown.

[TakeFive]

Will gas prices drive buyers downtown?

Not if you're upside down on a house in the valley.

And where exactly is "downtown"? Pasadena is still the suburbs, so this really isn't a good example.

I think the emerging story on gas prices will be about cash flow. A lot of bills can be delayed - electricity, water, mortgage, etc., but gasoline is cash on delivery for a lot of folks. Do consumers have this much additional free cash flow between paychecks?

[Housing Bull Chorus]

Oh you bet those high gas prices are gonna drive you lowlife renters downtown. Even if you work on the Westside. You'll all have to come down to sell apples on the streetcorners to all the lucky overpriced condo owners.

You'd better line up quick to get the best units before word gets out to the legions of homeless people down there because before you know it, they'll all have snapped up their granite and stainless covered condos before you even know what hit you. After all, the homeless haven't been throwing their money away on RENT like *you* morons have!

Maybe they'll let you have their cardboard boxes after you get thrown out of your crappy WeHo studio apartments when you all lose your jobs and wished that you had bought that downtown loft in order to be closer to jury duty and your new panhandling jobs.

And don't forget about the low, low prices on crack from your friendly neighborhood dealer!

[MyLessThanPrimeBeef]

Don't worry, the increase in ex-surburbanites downtown will be offset with decreases in Swedish au pairs (weakening dollar, more expensive Trans-Atlantic fare) and other illegal immigrants as the smugglers tack on fuel surcharge.

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[sfvrealestate]

Housing Bull Chorus, lol. Chris, you are so right. Wall Street Journal and AP, this isn't NYC or Philly or Boston or any of the other eastern cities where everybody already works downtown.

[Jack]

People may save money on gasoline moving to a loft, but the energy savings will be eaten up by the bills to heat or cool the place. The sample picture you have in this item is a good example -- those soaring cathedral ceilings may look marvy in a decorating mag, but they're a horror to heat and a terror to cool. That sweeping expanse of window glass won't help, either. It'll pour heat in the place during the summer and bleed heat in the colder months.

[perks]

Will more people move downtown? I doubt you'll see a swarm of buyers of the overpriced lofts in Downtown LA. But I do think that homes near major transit routes will tend to sell more quickly nowadays, though not necessarily for more.

One of the reasons I bought the house I'm currently in is because it's within easy walking distance of a commuter bus line from the Valley to a block away from my office in the Westside, so I would have the option of direct public transit when i need it (although I usually carpool). I think transit access will become a more important selling point until energy costs fall (if they ever do), but I still think there are plenty of factors that would keep all but a small demographic of people from storming downtown.

[E]

You want to live in a downtown "luxury" condo?

There are two ways to do it as far as I am concerned.

1. Rent from a desperate flipper. Make sure you lowball then on the rent price. If the "floplord" wants to play hardball and stands firm with his/her price...move on to the next one. Plenty out there. Don't be afraid to actually laugh at the person on the other end of the line when inquiring about the rental if they actually believe they'll get their asking price. Once in the rental, sign up for Foreclosure.com in order to monitor the loser who probably bought the place with an Option ARM. Then, sit back, crack open a brew rent the movie Pacific Heights.

Finally, feel like a sucker for even renting one of these new urban "luxury" condos because your neighborhood still sucks.

2. Buy from a bank after it either forecloses on the flipper or after it forecloses on the developer. Make sure that you offer no more than $150-200/sf *even* if there are Viking appliances. If there is no view then $100-$125/sf

Vote with your dollars. Just say NO to greedy developers and flippers.

[Julia]

How many people actually work downtown? I don't know anyone.

If your single and you work downtown, renting an apartment downtown make sense, but I don't see a whole bunch of suburbanites picking up and leaving all that's good about the suburbs just because gas is a bit more expensive. Buying a home is more than just economics, it's about schools, safety, and community.

I live in Thousand Oaks and commute to Burbank every day, while I would love to live in Burbank to save on the commute, I've owned my home in TO for 15 years, it would make no financial sense to sell my house and move just to save $75 bucks a week on gas.

[David G.]

Another timely article Peter, good job!

Most people bought out in the burbs because they could not afford to live in town, at least in something livable. That has not changed because American wages have been stagnant for 30 years. So, to reply to the question, no. Buyers can afford even less now. USA Today on Monday said that utilities nationwide are going to raise rates as much as 29%, this after a 30% increase in the last 5 years already. Just another in a long, long list of stuff you need skyrocketing in price.

We need domestic energy that we do not have to outbid China and India for, and we need to rebuild our job base (good jobs, not WalMart and Subway).

Peter why don't you do an article on this organization:

http://www.AmericansForJobsAndEnergy.org/

They are gathering support for a Bill in the Senate right now aimed at lower gas prices, affordable domestic energy and hundreds of thousands of good jobs. They don't ask for money, no ads, no donations.

Cheers
David

[Giacomo]

"Suburban residents will move into urban areas because they can't stand their commutes anymore."

Dream on. Suburbanites live away from urban areas (including our so-called "Downtown") because they get more living space for less money further out. The price of gas might alter the equation somewhat, but we're not anywhere near a tipping point.

People LIKE backyards, better schools, lower crime, and quiet. They will do without Starbucks, dinners out, expensive toys, etc., as necessary, to keep their basic way of life.

In the sprawling geography of greater L.A., families are going to forsake relatively open spaces to cram together in centralized urban areas? It's an absurd notion,--a fantasy of elitists (use of the word "ennui" is a giveaway to the type!) who are ignorant -or contemptuous-- of the priorities of everyday people.

Look for higher MPG vehicles, flex-time, car-pooling, work-from-home, other cost-cutting. Don't expect mass migration into the city, it ain't gonna happen.

[mbob]

52 suburbs in search of a downtown.

Ain't found it yet, neither.

Keep gettin' the creepazoidal sense that LA will go the way of the Motor City, its decrepit former supplier.

To quote the great, never equalled Randy Newman

"....she didn't grow up, she grew out..." (Old Kentucky Home)

[Steve]

Who the hell with a brain and a family will live in downtown LA. LA is not and will never be a great city to live in like SF or NY, even though the develpers make that absurd claim. As far as gas, I feel the opposite will happen, major employers downtown will relocate to the burbs for affordable labor. Get real if a downtown business wants attract skilled labor they have to pay a 30% premium to get them there. What is interesting is I lived in LA for 40 years and never met anyone who wanted to work in downtown LA. These chumps over paid for condos that will soon be a glorified ghetto. When does it soak in everyone in Cali hates downtown LA.

[Tim K.]

All of the people who really are desperate for downtown urban living who are able to move, will probably find it better just to move to another city that already has a real downtown like New York, SF, Chicago.

Echoing what others have said above - the real reason people move to Los Angeles is they like the way it is today - car culture, widely varied, and they like the suburbs and don't mind the commute.

If you ever run into anyone who complains bitterly about the commute and whines about how LA is not like New York, chances are they actually lived in New York and are having withdrawl. Two things happen - either they adjust to it (but keep whining because it makes them sound more superior) or they move away to another city. They won't actually move downtown though.

[Mark]

I just looked at the homicide blog and filtered for all homicides within 5 miles of downtown.

Since Jan 1 2007, there have been 268 of them. Thats nearly a centuries worth of them in my quiet boring suburb in OC.

I think I will pay the higher gas bills.

[Laker]

TakeFive wrote: "...A lot of bills can be delayed - electricity, water, mortgage, etc., but gasoline is cash on delivery for a lot of folks. Do consumers have this much additional free cash flow between paychecks?..."

TakeFive,
I think you are wrong here. Every time i stop at a gas station, i see everybody using credit cards to fill up. I hardly see people walking inside with cash.. Now maybe some use the debit option, but i really doubt, as most gas stations accept credit cards, there are no fees, and on top of that you can get 5-6% cash rebate on gas...so why use cash?
Only arco and some very small brands take cash only.
Not an issue, maybe until the cards get maxed out...With all the credit card promotions and offers I'm getting in the last 4 months...I think the CC companies are drowning in cash from the FED's window at 2%, are just trying to shove it to people to use for shopping...I think this binge by the FED is the thing that is going to destroy the economy. The FED's desire to help banks and wall street will destroy them and the main street.

[Valley Observer]

Posters on this blog gloat over buyers who are underwater in their houses. I tend to feel the same way about people who own a Suburban and can't afford the gas when a Honda Fit would have satisfied their transportation needs, if not the other needs that apparently people satisfy via their cars.

[Uncle Billy Barks @ Mont Pelerin]

VO: I take my kids to school every morning and I've noticed two things:

1) Drivers of big suv's are looking sillier and sillier and guiltier and guiltier, especially the ones with the giant dogs hanging out the window and the ones that drive with their knees -- starbucks in one hand, cell phone in the other.

2) People in the larger vehicles are becoming more aggressive and less considerate. They'll stand in the middle of the street to drop off and collect their kids, blocking people behind them, or park diagonally head-in, blocking people behind them. They'll be the first to honk when they're stuck behind someone else doing the same thing.

Don't they realize they're contributing to further reductions in sales prices in their neighborhoods?

[Susan]

"His apartment building straddles a light-rail line"

Really? Sounds noisy.

[tealeaf]

VO:

My wife drives a crossover Subaru SUV. It's a hopped up wagon that gets average 20mpg. Certainly more fuel efficient choices out there, but with kids comes STUFF. We actually use our 3 rows of seating and the space that the 3rd row provides. For us, we couldn't travel to San Diego or Santa Barbara or even a daytrip to see the grandparents without it. We do a mini-trip twice-three times per month.

Do you:
- Look down upon BMW 7 series drivers? They earn lower fuel economy than we do.
- Frown upon speeders who unnecessarily burn gas?
- Grimace at people with extra stuff in their cars (2% less efficient per 100lbs)?
- Get annoyed when folks sit idling in the parking lot, earning 0mpg?

One other point: you have to look at the consumption / footprint PER HOUSEHOLD. One Tahoe + One Fit can be more efficient than 2 V6 sedans - it all depends on usage.

Methinks there is scapegoating in play. SUVs are obvious enough to be the bane of all our ills, but the problem is more complex than a single class of vehicle.

[tealeaf]

Mark:

Have you considered the actual rate vs. the count?

Being in the Valley, I'm certainly not lobbying for downtown living, but don't mistake statistics for reality.

Go ahead, shock & puckhead -- insert bear snipe .

[Liz]

I work downtown, and I find it more likely I will look for a job closer to home than move to downtown. I think most other people feel the same, especially if you have family, leases/mortgages, local community activities, etc.

[aldo818]

Wow such venom for downtown!

Kinda looks like an over reaction to the point of the article.

I don't think that it said ALL suburbanites are trying to move downtown. It looks like they are seeing an increase of people moving closer to downtown.

It seems like common sense to me. It saves saves time and gas to do this. I've met two families so far that did buy condos downtown and they only use thier cars on the weekends. That sounds awesome to me.
Would it work for everyone? No, it wouldn't work for me since I need a back yard for my toys and stuff.
The major issue that I have with downtown living is the homeless. There is just too many for many to want to spend $500k on a home down there.

Closer to downtown - YES. In downtown - not yet.