Gas prices affect home location

Jon Boyd, Jun 28, 10.

Gasoline prices influence where households decide to locate by changing the cost of commuting, according to a paper published by the Federal Reserve Board. “The Effect of Gasoline Prices on Household Location,” by Raven Malloy and Hiu Shan, says “Consequently, the substantial increase in gas prices since 2003 may have reduced the demand for housing in areas far from employment centers, leading to a decrease in the price and/or quantity of housing in those locations relative to locations closer to jobs.

The paper continues:

Using annual panel data on ZIP codes and municipalities in a large number of metropolitan areas of the United States from 1981 to 2008, we find that a 10 percent increase in gas prices leads to a 10 percent decrease in construction after 4 years in locations with a long average commute relative to locations closer to jobs, but to no significant change in house prices. Thus, the supply response may prevent the change in housing demand from capitalizing in house prices. Because housing is durable, the resulting change in construction has a long-lived impact on the spatial distribution of housing units.”

Download the full paper (477 kb .pdf)

(Photo credit: LancerE)