You wouldn’t think one of consumers’ smaller purchases, a $60 tank of gas, could impact their largest buy, a home. But that appears to be the case.
Data from the California Association of Realtors shows bedroom communities in places such as Riverside County, Orange County, Santa Cruz and the Central Valley are getting hit a lot harder in terms of sales declines than bigger cities such as San Diego, Los Angeles and San Francisco. The big cities continue to see home price appreciation, as well. The burbs are seeing home prices fall.
Higher gas prices prompted the California Building Industry Association, which represents new home builders, to lower its forecast for new homes built. The association now predicts that as few as 90,000 new homes will be built this year, down from the 110,000 forecasted in January. As recently as 2005, the industry sold 121,000 new homes.
The impact of gas prices also appears evident in apartment rents. Yesterday I noticed a one bedroom in my Los Angeles neighborhood renting for $1,400 a month. Today I stopped by a new apartment building being built directly over a subway stop near my office. (Yes, Los Angeles has a subway). It’s not exactly the prettiest location but it’s convenient if you work downtown. The rent for a 500 square foot studio apartment was $1,500—practically New York money!