I came upon an interesting report out from Deutsche Bank on the effect high gas prices are having on home prices. Below are some highlights:
- Gas prices are up 167% in the last five years, 32% in the last year.
- Monthly gas expenditure is up to $519 in June '08 from $173 in June '02.
- $54,000 in home price purchasing power has been lost in the last five years; $22,000 in the last year alone (Inland Empire, CA is the worst at 46% lost in the last five years).
- As measured by increased monthly expenses and translated into mortgage payment terms, the impact of rising gas prices is equivalent to a 2.47% increase in mortgage rates over the last five years; 0.98% in the last year (Inland Empire is again the worst at a 4.35% effective increase over five years).
- Deutsche sees non-bubble areas like Texas and the South more exposed to gas price increases than bubble states, due to long commute distances and low relative home prices.
- Homebuilders are being negatively effected by this trend, particularly in developments far away from the city center.
- Builders will likely switch strategies and focus on urban "infill" and closer-in townhome projects.
- According to Deutsche, Meritage Homes (MTH), Ryland (RYL) and Lennar (LEN) have the most exposure to highly impacted areas; MDC Holdings (MDC), NVR (NVR) and Toll Brothers (TOL) have the lowest exposure.
