The decrease in oil costs can also help home buyers, especially first-time home buyers, looking to buy and maintain properties at a cheaper cost.
Chicago, IL (PRWEB) January 09, 2015
With the U.S. oil boom, consumers not only benefit from an abundance of energy resources but also lower fuel costs. Since the U.S. continues to see a decrease in prices for gas from the previous year, The Federal Savings Bank thinks housing market could see more demand from consumers as mortgage rates remain low. Since Americans save money from low-cost gas, consumers could put this leftover income toward putting down a deposit and obtaining a mortgage.
For the first time in almost five years, oil prices dropped lower than $50 a barrel as a result of surges in production, The Wall Street Journal reported.
Since June, oil prices have been cut 45 percent since June 2014. As the effects of falling oil prices ripple throughout the economy, these implications could spur demand in the housing market.
The falling oil prices mean consumers spend less on gas in their monthly budgets, giving them the financial freedom to spend their income on other purchases. While a home is still a big-ticket item, housing affordability is becoming less of an issue for Americans benefiting from growth in the economy and reporting increased confidence in the job market and rising salaries, CoreLogic said.
"Moreover, the recent drop in oil prices cannot be overstated, because not only does it directly lower the transportation and home energy costs for households, but it also improves consumer confidence," CoreLogic said in a report. "And confident consumers are more likely to spend on big ticket items, which is sweet music to the ears of the real estate market."
Effects of falling oil prices on consumer wealth
Since consumers are spending less money on gas, they could experience an increased feeling of wealth. This feeling, combined with low mortgage interest rates, could increase affordability for potential homeowners. Interest rates remain near historic lows and many consumers feel 2015 is an opportune time to buy, as rates could increase in 2016.
The decrease in oil costs can also help home buyers, especially first-time home buyers, looking to buy and maintain properties at a cheaper cost. In a report, CoreLogic noted that home appreciation could slow down, MarketWatch reported on January 6th. As a result, prices for low- and middle-tier properties could stay affordable for first-time home buyers who are hoping to establish their footing in the housing market.
"Three of the top four states with the highest price appreciation are energy intensive and had been benefitting from the energy boom which is currently receding as oil prices trend downward," said Sam Khater, deputy chief economist at CoreLogic, according to MarketWatch. These states...may see some downward pressure on prices in 2015."
Once they do buy their homes, first-time home buyers can also save on the costs of gas for heating their properties. In addition, CoreLogic predicts inflation will remain low as oil prices are a significant factor in prices for consumer goods.
As first-time home buyers feel houses are more affordable now that oil prices have dropped, they should contact the Federal Savings Bank, a veteran owned bank, to learn more about mortgages and the home buying process.