As gas prices are steadily rising across the country, many U.S. residents are wondering when this increase will begin to slow down and whether or not sky-high gas prices could affect the housing market.
Over the past several years, housing prices as well as the costs of many common goods and services have slowly risen due to the pandemic.
Though many of these increases in cost have been caused by labor shortages and supply chain issues, some have stemmed from changes in tax rates. This is especially true for the taxing of oil, which affects gas prices all around the country.
Higher gas prices are difficult enough to deal with, especially for those who must travel long distances for work. Adding to that, the increases could also have a major impact on housing costs.
Why Gas Prices Affect Property Purchases
In 2022, gas prices have crept above $4 per gallon on average nationally, which is almost unheard of. Prices haven’t been this high since July of 2008, when averages reached approximately $4.06 per gallon.
When gas prices had their last huge spike during the 2008 economic recession, the housing market was similarly affected by the increased cost of living. Though there are many factors that can lead to increased property purchase and rental costs, overall cost of living can also affect people’s ability to afford adequate housing.
For many Americans, gas is an essential need that they have to fit into their budgets no matter what oil prices might be at the moment. Therefore, if people are paying more for gas and other household necessities, they’re less likely to be able to prioritize real estate investments like purchasing or renting a new home.
When the housing market is experiencing less turnover than normal it forces landlords and property owners to increase their prices to cover their operation costs. Consequently, as gas prices skyrocket, so do housing costs.
Once gas prices have started to drop and the effects of the pandemic on supply chain and labor shortages have subsided, housing costs throughout the country should move in the same direction.
Gas Prices and Home Energy Costs
General increases in cost of living aren’t the only reasons why property sellers and landlords will raise housing prices. Taxes on oil and carbon, which cause higher gas prices as they increase, can also bleed into the general costs of retail energy.
This means that as gas prices go up, powering your home with electricity and gas can get more expensive as well. Not only are homeowners or renters unable to consider property upgrades because of high initial costs, but the prices associated with living in a new or larger home can put too much strain on a family’s day-to-day budget.
In this way, utility costs can be just as much a barrier to entry for home buyers as down payments and mortgage costs during gas price increases. Unfortunately, this contributes to inflated housing prices, at least in the short term.
This article is for information, illustrative and entertainment purposes only and does not purport to show actual results. It is not, and should not be regarded as investment advice or as a recommendation regarding any particular investment action.