Gas Prices and Home Values

Posted by: Chris Palmeri on April 16, 2008

Gas prices hit a new high today of $3.40 a gallon. In some markets they are already over $4. It seems the pain at the pump is even spilling over into the housing market, as home prices have fallen more dramatically in the so-called ex-urbs where residents face long drives to work.

Take Murrieta, Calif., incorporated in 1991. The population of Murrieta more the doubled to 100,000 over the past eight years, as residents traded hour-long commutes to San Diego or Orange County, Calif. for newly built mini-mansions at lower prices. In the past year though home prices in Murrieta fell 31% to a median $329,000.

Some 5,000 Murrieta homes are in foreclosure, figures Mayor Richard Gibbs. The city council recently passed ordinances requiring banks that foreclose on property to register the houses with the city and hire property managers to maintain them. Failure to do so can result in fines of as much as $1,000 a day.

While cutting back on other spending, the city recently hired an economic development officer to stir up local jobs. “We’re trying to take moms and dads off the freeways,” as Mayor Gibbs says. “When they moved here gas was less expensive.”

Reader Comments

Wes

April 16, 2008 8:28 PM

What a joke, spend 2 hrs a day driving to live in a homogenous suburb?

Unfortunately runaway sprawl has threatened the very lifestyle we are used to living. When these people realize the jobs are not coming to them, they will move back into the cities leaving neighborhoods without occupants. They can rightly be torn down and reduced to pasture once again.

Lane Bailey

April 17, 2008 2:35 PM

Some areas are having a harder time with that than others. Here in the Atlanta metro, very few jobs are "downtown" and most of the adjustments will be people changing the suburban area they live in to be closer to the suburban area they work in... or changing jobs. We are also seeing more companies embracing tele-commuting.

NotSoSimple

April 19, 2008 2:17 AM

Writer did not do his research. The blue collar folks who moved and bought housing in Murrieta, Temecula, Corona, and Moreno Valley wanted to live the California dream of having a single family detach home with a pool lined with palm trees and lush green lawn because they couldn't afford it in LA or OC counties so they bought their nightmare in cheap Riverside and San Bernardino Counties where cows, goat, pig and sheep roam on endless desert pastures. The more objective observers see these dreamers living in an illusion that real estate industry brainwashed them as the true American dream. Just witness the daily traffic congestion on the 91Fwy during rushhour. Even the newly constructed toll road is in grid-lock. The combination of $4/gal fuel, declining home prices, higher property taxes, and upward ARM will increase foreclosures. The old promotion was: Come to California and live the California Promise. The new reality: Come to Calfornia and live the nightmare. Time to head to Utah, Montana, SD, ND, Idaho.

California-Scam

April 19, 2008 3:45 PM

Can't afford to live in the coastal area, the blue-collar workers buy their American dream in the hot, arid desert of Riverside and San Bernardino Counties. Suburbia like Moreno Valley, Murrietta, Corona, and Apple Valley sprung up from the desert sands of hell's inferno to satisfy the illusion of success: the single family detached house. The prized wood house, built with 2x4 studs at 16" on center covered with stucco mud are marketed as the California symbol of the good life, and the outward announcement of your success, your arrival. The mindless masses ate it up;swallowed it whole; integrated it into their core psyche. And paying the price. They sit for hours on the 91Fwy headed to and from their American dream, suffocating under tailpipe smog, dessicating under the desert heat, wasting their precious lives for an illusion of success sold to them by Madison Avenue. Living from paycheck to paycheck, two income family's wages goes to pay the mortgages, property taxes, insurance, utilities,car payment, creditcards and gasolines. Proudly they claim their success, proving to others and more importantly to themselves their home-ownership as evidence. But the desert cemetries bear witness to all those who pursued and perished believing in the fake American dream, and who succumb to the fatal lies of Madison Avenue. The blue-collar class has come, worked, and died for nothing. It is said that "To each according to his needs. To each according to his ability." In Calfornia the motto is, "To each according to his gullibility. To each according to his fantasy."

California-Scam

April 19, 2008 3:45 PM

Can't afford to live in the coastal area, the blue-collar workers buy their American dream in the hot, arid desert of Riverside and San Bernardino Counties. Suburbia like Moreno Valley, Murrietta, Corona, and Apple Valley sprung up from the desert sands of hell's inferno to satisfy the illusion of success: the single family detached house. The prized wood house, built with 2x4 studs at 16" on center covered with stucco mud are marketed as the California symbol of the good life, and the outward announcement of your success, your arrival. The mindless masses ate it up;swallowed it whole; integrated it into their core psyche. And paying the price. They sit for hours on the 91Fwy headed to and from their American dream, suffocating under tailpipe smog, dessicating under the desert heat, wasting their precious lives for an illusion of success sold to them by Madison Avenue. Living from paycheck to paycheck, two income family's wages goes to pay the mortgages, property taxes, insurance, utilities,car payment, creditcards and gasolines. Proudly they claim their success, proving to others and more importantly to themselves their home-ownership as evidence. But the desert cemetries bear witness to all those who pursued and perished believing in the fake American dream, and who succumb to the fatal lies of Madison Avenue. The blue-collar class has come, worked, and died for nothing. It is said that "To each according to his needs. To each according to his ability." In Calfornia the motto is, "To each according to his gullibility. To each according to his fantasy."

Mark Anderson

May 23, 2008 9:23 AM

This article inspired me to come up with a solution to rising gas prices that will help us all cope with the situation.

It's an out of the box idea but it could actually be a viable solution with a little refinement.

Here's a link to my blog:
http://piggybackrideshare.blogspot.com/

My hope is that your next story about rising gas prices would include mention of this blog as my goal is to start a regional or even national discussion providing a collection of brainstorming ideas. Gas prices may never return to the good ole days and here's a bit of irony, as I was writing this email, the TV news reported about a local gas station with prices at $4.19 per gallon. Good grief!

Also, getting the attention and cooperation of engineers, traffic industry experts, trucking companies and information technology experts would be essential in being able to tie all this together and revolutionize the way we deal with our current economic conditions.

JASON ONG

June 15, 2008 12:54 PM

As long as gas prices increase or remain high, suburbia will continue to show weakness in sales. It will be a hard sell even at 2003 prices to unload homes in these areas since people have been very conscious of fuel expenditures.

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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