Tuesday, October 12, 2004

Do gas prices affect real estate?

As you are probably aware, record-high crude oil prices are now pushing gas prices upward. With higher gas prices comes the obvious rise in commuting cost (for those of you driving to your destination).

Let's see how this affects your housing situation.

Let's say you are getting a $300,000 loan at 6% interest for 30 years. The principal and interest payment would be approximately $1800 per month.

Now let's say that your commuting cost has gone up $100 per month due to the rise in gas prices.

If you had taken that extra $100 and put it into your mortgage payment, you would have been able to afford a loan of approximately $320,000.

If you knew that it would cost you more to commute from your home, would that have made a difference in WHERE you would buy a home? Would you have bought a home closer to your work with that extra $20,000?

Perhaps in the future the cost of commuting will be a more important factor in the selection of a community to call home.

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