Lower Energy Prices And Housing Demand?

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Peoples Home Equity shares an intriguing article published by Corelogic highlighting the relationship between vehicle miles traveled per capita and America's homeownership rate.

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After June 2005, the higher gas prices increased the more Americans wanted to drive less and purchase a property closer to urban areas.

Peoples Home Equity was intrigued by a Corelogic.com article published on November 18th titled “An Unexpected Windfall Could Lower Energy Prices Stimulate Housing Demand?” The article highlights how the recent fall in energy prices may spur housing demand.

With energy prices in a downtrend, home heating oil has is $0.40 below this same time in 2013. Corelogic, which engaged in real estate consumer analytics, stated “that In the past four weeks, the average price of gasoline has fallen by almost 30 cents to just over $3 per gallon.” This has left Americans with more money their pocket and possibly a housing stimulus.

Homeowners pay for energy prices in two ways: “to heat their homes and for commuting costs, one of which can have a direct impact on housing choices.” In the early nineties when fuel prices were under $2 a gallon, “many homebuyers moved further from the urban core to buy larger and/or more expensive homes.” Corelogic used vehicle miles traveled per capita to base their demand for suburban/rural living. From 1991 to 2014, Americans traveled the highest miles per capita in June 2005. After June 2005, the higher gas prices increased the more Americans wanted to drive less and purchase a property closer to urban areas.

To emphasize their point, Corelogic compared the American homeownership rate and vehicle miles traveled. The relationship between these two data points showed that the higher vehicle miles traveled the higher the homeownership rate. Since 2005, vehicle miles have fallen and so has the U.S homeownership rate.

Of course homeownership has fallen due combined overabundance of easy credit and low interest rates earlier in the decade, but one cannot ignore the strong relationship Corelogic has proposed between vehicle miles traveled per capita and the America’s homeownership rate. Peoples Home Equity believes one additional factor at play for the fall in homeownership rates is that as more individuals returns from rural areas to urban ones, urban centers do not have enough property listings for sale to satisfy demand. This forces individuals into buying versus renting an apartment.

If interested in purchasing a property in an urban center to save on travel time to work, know that now is the time, mortgage rates are near historic lows, and home prices remain below peak levels. Consider using Peoples Home Equity as the lender. Contact a Peoples Home Equity loan officer today at: 262-563-4026

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Giorgio U Ferrero
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