Back in April 2008, I asked the question of whether high gas costs should affect buyer behavior.  I'm back to report that gas costs indeed seem to be affecting where people are willing to live.

Over the past two weeks, I have had three separate buyer clients who have decided not to pursue a home (or homes) in a particular neighborhood or town because of the distance it would put them from their place of employment.  All three work in Harrisonburg, and have decided to primarily look at properties located in the City.

This was an interesting question posed by a friend a few weeks ago, and we took some time to do some rough analysis, which seemed to indicate NO. Here's the logic:

Historically, some people who work in Harrisonburg have chosen to live outside of Harrisonburg where housing is somewhat more affordable. Two classic examples of this are Weyers Cave (14.4 miles away) and Broadway (12.9 miles away). Both Weyers Cave and Broadway have offered home buyers housing at somewhat lower prices, within a reasonable commute to Harrisonburg.

But with gas costs going higher and higher, could (or should) this buyer behavior change?

The distances above (14.4m, 12.9m) were city-center to town-center. We'll round up, and say the one-way commute for a fictitious commuter is 15 miles. We'll assume a somewhat gas-hungry vehicle that will drive 20 miles per gallon of gas. With current (4/29/2008) gas costs around $3.60, the one-way commute has a gas cost of $2.70. Driving both ways to and from work, 5 days a week, 50 weeks a year, equates to an annual cost of $1,350.

If someone lived in Harrisonburg instead (and still worked in Harrisonburg), their commute might be 3 miles, which would equate to an annual cost of $270. Thus, the cost savings in gas consumption (relative to the work commute) of living in Harrisonburg instead of Broadway or Weyers Cave is approximately $1,080 per year.

That $1,080 per year, or $90 per month, if used to allow the home owner to afford a larger mortgage payment, would allow for a home purchase of $13,500 greater. That is to say that a $200,000 home ($40k down, 6% rate) would have an $1,100 monthly payment, and a $213,500 home ($40k down, 6% rate) would have an $1,190 monthly payment.

So, the question then becomes, does a $200,000 home in Broadway or Weyers Cave cost $213,500 in Harrisonburg, or more, or less?

Broadway: 4 bedrooms, 2.5 bathrooms, 1517 SF, circa 2007, garage, $199,900
http://60755.scottprogers.com

Weyers Cave: 4 bedrooms, 2 bathrooms, 1584 SF, circa 2003, $199,000
http://64154.scottprogers.com

Harrisonburg: 3 bedrooms, 2.5 bathrooms, 1360 SF, circa 2002, garage, $214,900
http://62949.scottprogers.com

Though the data in my example is limited, it seems that even accounting for the commuting cost of living in Broadway or Weyers Cave, you can still buy a (somewhat) larger, (somewhat) newer house in those communities as opposed to Harrisonburg.