What does local gas prices say about rates in your neighborhood? -Stefan
by Nick Timiraos
Depending on where you live, rising gas prices can change the value of your home—for better or worse, according to a new paper.
The study found that a 10% increase in gas prices can boost home prices by around 2% in certain neighborhoods, while reducing prices by around 1% in others.
The paper, from the Climate and Energy Economics Project at the Brookings Institution, was authored by Adele Morris, the center’s director, and Helen Neill of theUniversity of Nevada, Las Vegas.
They examined data on more than 930,000 home sales in the Las Vegas area between 1976 and 2010. Adjusted for inflation, gas prices ranged from a low of $1.22 a gallon in early 1999 to a high of $4.08 a gallon in June 2008. Home prices rose slowly in Las Vegas until around 2001, when they rose sharply and then plunged just as sharply in 2007.
The study found that neighborhoods closest to the Las Vegas city center and to the west and south of the city, around the Highway 215 corridor, tended to become more valuable as gas prices rose, with a gain of as much as $5,600 in value.
Homes in the hinterlands of Las Vegas’s Clark County did worse, with declines of up to $7,800. The paper found that most homes in the mid-city saw value changes of around $500—a rather small effect.
The study also showed that the intensity of the relationship between home prices and gas prices may have weakened as the fuel economy of American cars have improved.
A separate study published last year by Raven Molloy of the Federal Reserve Boardand Hui Shan of Goldman Sachs found that a 10% increase in gas prices was associated with a 10% decrease in home construction in locations with an average commute exceeding 24 minutes. But that study didn’t find a significant relationship between home prices and gas prices.