Did High Gas Prices Fuel the Housing Crisis?
High gasoline prices provided the trigger that burst the [housing] bubble,” says JunJie Wu, an Oregon State economist and one of the authors of a new study that blames high gas prices as the main culprit for the housing crisis that started in 2007.
“The theory recognizes the role of subprime mortgages and lax lending practices as inflating the housing bubble,” Wu says, but adds that a spike in gas prices was the “trigger.”
The new study, conducted by economists at University of California, Berkeley, and Oregon State University, attempts to pinpoint the cause of the housing crisis. The researchers say that while the housing market is blamed on initiating the 2007 financial crisis, researchers have found little consensus on what actually caused the housing crisis in the first place.
The researchers offer rising gas prices as the main culprit, noting that oil prices more than doubled between late 2006 and 2008 to $4.15 per gallon.
“The real estate mantra is ‘location, location, location,’” Wu says. “If you find yourself in a location that is far from work and transportation costs rise suddenly, that location can lower the value of your house.”
The researchers note that mortgage default rates were highest in commuter areas. Also, they say that low-income households and suburban homes located away from business centers were the most vulnerable in the housing crunch.
So will the recent rises in gas prices slow the recovery? Yes, say the researchers, “especially for communities tied to high transportation costs,” Wu says.
Comment
-
Comment by Mary Beth Kaminski on April 10, 2012 at 7:55pm -
Today it seems the rise in prices of "everything" is blamed on high gas prices. If a widget goes up $.10 and a gallon of gas goes up $.10 where is the correlation when a semi can carry a whole lot of widgets??
Why doesn't the price of homes go up since everything else does when gas prices rise??!! I don't see the correlation there either. Gas prices seem to make most things rise in price for the consumer. i PERSONALLY THINK GAS WAS NOT THE ONLY CUPPRIT!
-
Comment by Jimmy Williams on April 10, 2012 at 4:53pm -
I have to applaud Mr. Wu for someone finally speaking up about what gas prices do to the people who are the most venerable to a spike in gas prices. Business have to go up on their prices to cover the added cost associated with an unexpected spike in gasoline/diesel prices. Food vendors, restaurants, government, etc all have to raise the cost of their products, (taxes), just to stay even. For someone on the edge to begin with it can be the tipping point. So in conclusion I can see where the unexpected spike in gasoline prices helped to contribute to the bubble bursting. But as the sole cause I don't think so.
-
Comment by Elie Morris on April 10, 2012 at 3:00pm -
Lame. Very lame.
-
Comment by Ryan E on April 10, 2012 at 1:30pm -
I understand what they are trying to say. Gas prices are as high today and going higher and I don't see any bubbles bursting or events being triggered. My point is you could pick any event with economic impact that was happening at the time. More coincidence than anything else. Bottom line the overheated market would have began to unwind with or without high gas prices.
-
Comment by Endre Barath, Jr. on April 10, 2012 at 1:22pm -
I find this analysis by the Oregon State Economist as totally off base. The Fed Chairman kept worrying about "inflation" and he lacked the understanding that by raising the interest rates as a steady diet for about 10-15 times would tank the Real Estate Market. When he kept doing it I thought he would just tank the US Real Estate Market. I did not realize that it was such a Global Economy. Obviously he was less aware than I was. Go figure. I am fascinated how this guy came up with this theory, sadly he is in the position he is. He obviously is in the wrong Job Position.
-
Comment by Glen Hagen on April 10, 2012 at 1:12pm -
So I guess, 16 straight, prime rate increases by the Fed had nothing to do with putting the brakes on housing!
-
Comment by Stephen Butler on April 10, 2012 at 12:16pm -
I don't read this "theory" as supporting the idea that the rise in gas prices created the bubble. The economist is simply postulating that the gas price increase brought about a moment in time when the bubble burst. I think that concept is entirely credible. But, if the rise in gas prices had not provided the trigger at that specific moment in time, something else would have provided the pin prick to burst the bubble at a later date after the bubble had been inflated even more.
-
Comment by Ryan E on April 10, 2012 at 11:56am
-
This is laughable at best. high gas prices were the trigger? So if gas prices remained low, there would be no trigger and the prices and sales would still be going through the roof? There were a number of factors that led to the crisis. Blaming gas prices is a joke.
NAR News
© 2013 Created by GLOZAL.
You need to be a member of GLOZAL - A Global Real Estate Network to add comments!
Join GLOZAL - A Global Real Estate Network