Economic News
What Opportunities will gas prices present?
My belief is this – properties that are closer to urban cores – roughly defined as having a coffee shop/grocery store/park/gathering place – will appreciate at a greater rate than those that require more driving to get to said urban centers. Using back-of-the-napkin math – if when gas costs five bucks a gallon – If driving to the store/work/etc costs an additional ten to fifteen dollars for those properties not close to urban centers, and the properties the are close to urban centers are able to save that gas money – isn’t it reasonable to conclude that that theoretical savings of three to five hundred dollars a month would then be applicable to one’s mortgage payment?
Paul Krugman validates what I’ve been saying to clients/readers/prospects for some time.
Any serious reduction in American driving will require more than this — it will mean changing how and where many of us live.
My belief is this – properties that are closer to urban cores – roughly defined as having a coffee shop/grocery store/park/gathering place – will appreciate at a greater rate than those that require more driving to get to said urban centers.
Using back-of-the-napkin math – if when gas costs five bucks a gallon –
If driving to the store/work/etc costs an additional ten to fifteen dollars for those properties not close to urban centers, and the properties the are close to urban centers are able to save that gas money – isn’t it reasonable to conclude that that theoretical savings of three to five hundred dollars a month would then be applicable to one’s mortgage payment?
I am seeing a contraction of the geographic area I service, and clients are now asking more and more about bikeabilty, walkability and public transport. Higher gas prices are likely to impact our business in fundamental ways – among them –
– Business models – buyers pay up front or do more legwork on their own. Hybrid Redfin models or derivations thereof may become more popular and prominent.
– Denser suburbs and fewer exurbs
– Increased taxes – property tax and sales tax – to increase infrastructure, thus affecting affordability
– Fewer Realtors and real estate agents as more discover that the Realtor pot of gold is harder to find.
– MLS’s may have to change their restrictions on neighborhood and area photos and videos – consumers (and Realtors!) want to see more than what is currently offered. If MLS’ want to remain the primary point of contact, they will have to adapt and provide more. Including or excluding properties without physically visiting properties will be more and more important.
– More boutique brokerages as the cost of doing business becomes too great for many of the bigger brokerages.
When we are looking back at this recession in five years with the benefit of hindsight, what opportunities will we be thankful we took advantage of? What opportunities will we wish we had seen and seized?
Related reading:
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Is the real estate industry endorsing Carson’s nomination to HUD?
(BUSINESS NEWS) Ben Carson’s initial appointment to HUD was controversial given his lack of experience in housing, but what is the pulse now?
Economic News
Job openings hit 14-year high, signaling economic improvement
The volume of job openings is improving, but not across all industries. The overall economy is improving, but not evenly across all career paths.
Job openings hit a high point
To understand the overall business climate, the U.S. Labor Department studies employment, today releasing data specific to job vacancies. According to the department’s Job Openings and Labor Turnover Survey (JOLT) for April, job openings rose to 5.38 million, the highest seen since December 2000, and a significant jump from March’s 5.11 million vacancies. Although a lagging indicator, it shows strength in the labor market.
The Labor Department reports that the number of hires in April fell to 5 million, which indicates a weak point in the strong report, and although the volume remains near recent highs, this indicates a talent gap and highlights the number of people who have left the labor market and given up on looking for a job.
Good news, bad news, depending on your profession
That said, another recent Department report notes that employers added 221,000 jobs in April and 280,000 in May, but the additions are not evenly spread across industries. Construction jobs rose in April, but dipped in professional and business services, hospitality, trade, and transportation utilities. In other words, white collar jobs are down, blue collar jobs are up, which is good or bad news depending on your profession.
Additionally, the volume of people quitting their jobs was 2.7 million in April compared to the seven-year high of 2.8 million in March. Economists follow this number as a metric for gauging employee confidence in finding their next job.
What’s next
If you’re in the market for a job, there are an increasing number of openings, so your chance of getting hired is improving, but there is a caveat – not all industries are enjoying improvement.
If you’re hiring talent, you’ll still get endless resumes, but there appears to be a growing talent gap for non-labor jobs, so you’re not alone in struggling to find the right candidate.
Economists suspect the jobs market will continue to improve as a whole, but this data does not pertain to every industry.
#JobOpenings
Economic News
Gas prices are down, so are gas taxes about to go up?
Do low gas prices mean higher gas taxes are on the way? Budgeting for 2015 just got a bit more complicated, if some politicians have their way.
Gas taxes and your bottom line
Many industries rely heavily on time in their vehicle, not just truck drivers and delivery trucks. Sales professionals hop in their vehicles throughout the day, as do many other types of professionals (service providers like plumbers, and so forth). For that reason, gas prices and taxes are a relevant line item that must be budgeted for 2015, but with politicians making the rounds to push for higher gas taxes, budgeting becomes more complicated.
Gas prices are down roughly 50 cents per gallon compared to a year ago, which some analysts say have contributed to more money in consumers’ pockets. Some believe that this will improve holiday sales, but others believe the timing is just right to increase federal taxes on gas. The current tax on gas is 18.40 cents per gallon, and on diesel are 24.40 cents per gallon.
Supporters and opponents are polar opposites
Supporters argue as follows: gas prices are low, so it won’t hurt to increase federal gas taxes, in fact, those funds must go toward improving our infrastructure, which in the long run, saves Americans money because smoother roads mean better gas mileage and less congestion.
Gas taxes have long been a polarizing concept, and despite lowered gas prices, the controversial nature of the taxes have not diminished.
While some are pushing for complete abolition of federal gas taxes, others, like former Pennsylvania Governor, Ed Rendell (D) tell CNBC, “Say that cost the average driver $130 a year. They would get a return on that investment” in safer roads and increased quality of life, he added.
The Washington Post‘s Chris Mooney points out that federal gas taxes have been “stuck” at 18 cents for over 20 years, last raised when gas was barely a dollar a gallon and that the tax must increase not only to improve the infrastructure, but to “green” our behavior, and help our nation find tax reform compromise.
Is a gas tax politically plausible?
Mooney writes, “So, this is not an argument that a gas tax raise is politically plausible — any more than a economically efficient tax on carbon would be. It’s merely a suggestion that — ignoring politics — it might be a pretty good idea.”
Rendell noted, “The World Economic Forum, 10 years ago, rated us the best infrastructure in the world,” adding that we “need to do something for our infrastructure, not in a one or two year period, but over a decade.”
Others would note that this rating has not crumbled in just a few years, that despite many bridges and roads in need of repair, our infrastructure is still superior to even the most civilized nations.
Regardless of the reasons, most believe that Congress won’t touch this issue with a ten-foot pole, especially leading up to another Presidential campaign season starting next year.
“I think it’s too toxic and continues to be too toxic,” Steve LaTourette (the former Republican congressman best known for his close friendship with his fellow Ohioan, Speaker John Boehner) tells The Atlantic. “I see no political will to get this done.”
Whether the time is fortuitous or not, and regardless of the positive side effects, many point to a fear of voters’ retaliation against any politician siding with a gas hike, so this matter going any further than the proposal stage is unlikely.
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Barry Cunningham
May 20, 2008 at 2:23 pm
Hi Jim,
I would have read the article and may have enjoyed it but once you mentioned Paul Krugman it was all over for me.
Joel McDonald
May 20, 2008 at 2:25 pm
Great Post Jim!
I believe by the time we hit 5 bucks a gallon, we’ll start seeing “How far do you commute to work?” on mortgage loan applications, and associated “per mile” costs will be factored into back-end-ratios.
Jim Duncan
May 20, 2008 at 4:19 pm
Barry –
My first draft had a disclaimer that despite the fact it came from the NYTimes, it was a worthwhile article. It’s worth a read, seriously.
Jayson
May 20, 2008 at 4:26 pm
Great post and angle – I haven’t looked much at what opportunities are in rising gas prices. It’s always good to look for positives.
Ron Alpert
May 20, 2008 at 5:57 pm
This is the American version of the transformation in most South American and EU cities, where the poorest folks move to the outskirts. Predicable.
Faina Sechzer
May 22, 2008 at 5:43 am
For suburban areas without good public transportation (which many are) raising gas prices could have a big effect on affordability. Europeans have for a long time dealt with the issue by using public transportation. A lot of infrastructural changes, such as consolidating housing density and developing public transportation systems, would have to happen to simulate European way.
Thomas Johnson
May 22, 2008 at 12:15 pm
In the Sunbelt sprawl cities like ERAHouston, clients accept the brutal commute for one predominant reason: schools. The inner city schools are so bad, that with more than one child, the commute becomes a necessity when compared to a $20,000-$30,000 pre-tax per child private school bill. $5-$6 a gallon is still cheaper than tuition.
The problem with parents trying to change the schools with activism is that the child is out of the school before the there can be any changes from the education-tax and spend complex. The Educrats rely on this fact. It is cheaper for a parent to sacrifice themselves on the freeway during school years than it is to try to reform a failed system in time for the child to benefit. As the boomers age and the nests empty out, I foresee a shift back to the cities and the suburbs becoming the new low income areas. By the time there is any kind of public transportation to the outlying burbs, the millions of McMansions that have been built in the past ten years will have had their mortgages paid off. There will be a whole bunch of squriming in those outlying communities to maintain property values.
@Faina: ERAHouston has a 7 mile toy train line from downtown to the football field. It has been so expensive and the operating losses are so huge that our Metro bus service has been reduced to help cover the losses. The expansions to this line are going to cost billions more and there are no plans in the near future to move anyone from the ‘burbs to the work areas. Just a line to move tourists from one developer’s property to another. Of course, since we are the energy capital of the world, every spike in price means job growth here 😉
The metro Houston area is about 100 miles x 100 miles without counting ex-urbs. Hot fast growing cities like Phoenix and Atlanta are similar in sprawl. How do you mandate density? Houston does not even have zoning. There will be market based solutions based on individuals doing what is in their own best interest, but the effect of expensive energy on real estate will require us as professionals to pay attention and advise our clients accordingly-something which we have always done. These are issues which cannot be addressed by a realty.bot, either. It requires boots and a brain on the ground.
Jeremy Hart
May 26, 2008 at 9:35 pm
Jim, this is an interesting question. In some ways, you and I work very similar markets … Charlottesville proper has an area of about 10 square miles, I think, and Blacksburg proper is about double that. In our area, commute has not been that big of an issue for most of my clients – 15 minutes and you can get to most areas of the Blacksburg/Christiansburg/Radford, and 20 minutes takes out just about out of the entire New River Valley.
One thing I think the Townships will wish they had capitalized on is higher-density opportunities, like you suggest with the urban core idea. I think it’s something that rural areas like ours have missed out on, although Charlottesville seems to be ahead of the game among it’s peers. That’s one way I think our governments are going to have to adjust, not just in the short-term but for the long-term.
Among the industry, I think we’re likely to see a reduction in agents … but I think it’d be interesting to see how membership has fluctuated within local, state and national associations during economic swings. What has the pattern tracked?
I also agree that I think we’ll see some increase in boutique brokerages … didn’t we see a few in Arizona do this recently? 🙂 I’m part of a large brokerage, the largest in the area in fact, and all I keep hearing about is that we need to find a new way to market. I can’t help but think that the brokerage is trying to scale back out of fear, but seems like this is the time we should be looking for new ways to adapt and prepare for new markets. Perhaps large brokerages just can’t move that quickly.
I don’t know what the future holds, but I’m interested to see what comes of this. From trial comes opportunity.