How Does the Price of Oil Affect Real Estate Values?

The price of oil has been a growing concern for many people. Not one day goes by where you don't hear about the rising cost of fuel. It's affected how people drive, where people drive and what people spend their money on. It used to be that when you went to the gas station to put $20 in your car, you had time to clean your windows, but nowadays if you put $20 in the tank you barely have time to blink!

So, what does the price of oil have to do with real estate?

According to some economic analysts, rising fuel prices cause people to become more more conscious about where they live. There has been a shift in thinking when it comes to buying real estate and the rising cost of oil has played a role in that decision-making process. Many people don't want a long commute to work. Many real estate agents that I've spoken with have said that the price of gas is a concern for their clients. Consequently, this has made homes in many suburban areas less desirable.

A peaceful and serene home in the suburbs no longer looks so appealing when you have to spend an extra $500 a month in gas! In recent years home values outside of cities like Atlanta, Philadelphia, San Francisco, and Minneapolis are decreasing.

Just a few years ago, residents of San Diego were making an exodus to Murrieta and Temecula, California because they liked the idea of paying a quarter of the price that they would pay in San Diego for a home. Now there are many foreclosures in the area and home prices in Murrieta have fallen dramatically.

Do keep in mind, however, that homes in urban areas cost more, so the money you save by living closer to where you work in the city may end up just being a wash-out when you factor in a higher mortgage payment. Considering the higher cost of association fees in urban areas plus the cost of parking, it may not be that much cheaper to live downtown. However, you do save a great deal of time when you don't have to commute - which is certainly an appealing idea to anyone!

All of this could be good news for real estate developers in urban areas where condominium projects are still in the planning stages. This is also good news for people who would like to buy investment properties or second homes in urban areas. So, who said it was a bad time to buy real estate?

No matter how we look at it, real estate eventually goes up. Although the price of oil does have an effect on real estate values in the short term, in the long run real estate almost always ends up being a good investment.