Could High Gas Prices Reshape the Suburbs?

By Dawn Handschuh, Personal Finance Writer   

High gas prices could accomplish what environmentalists and urban planners have pushed unsuccessfully for years ⎯ greener, more sustainable lifestyles and a halt to suburban sprawl.

Urban exodus
For decades, there's been an exodus of people who jumped to trade city traffic, noise and crime for low-density, suburban living ⎯ when gas was cheap. But gas prices have doubled since 2004, forcing homeowners to rethink their choices. High gas prices mean living on the suburban outskirts isn't economical anymore. Increasingly, homeowners are drawn to redeveloped urban neighborhoods, retrofitted suburbs or mixed-use developments that enjoy greater access to public transit, retail outlets and jobs.1

Suburban real estate loses luster
Residential real estate prices are dropping more rapidly in far-flung suburbs than in neighborhoods with viable transportation alternatives to private vehicles. In Atlanta, Philadelphia, San Francisco and Minneapolis, for example, homes outside city centers have fallen in value faster than those more centrally located.2

According to a survey of over 900 Coldwell Banker realtors, 78% reported that higher fuel costs are prodding more homebuyers to consider living in urban areas; realtors also indicated an 84% increase in interest in properties with a home office compared to five years ago.3

Crude oil realities
There are challenges associated with retrofitting the suburbs for today's crude realities. Since the end of World War II, taxpayer transportation dollars have benefited highway and bridge building compared to public transit by a 4 to 1 margin. Some urban planners anticipate a reversal of this trend as the demand grows for housing developments clustered around transit hubs.4

In the meantime, the lack of public transit options in many suburbs won't spell the death of commuter culture, as plug-in hybrids and other fuel-efficient cars will partially compensate for higher gas prices in coming years. Other commuters are resorting to telecommuting, flex scheduling and/or carpooling to contain higher gas costs.5

For CreditFYI readers, transportation costs now represent a significant household expense that ranks right alongside your monthly mortgage payments, healthcare expenses or grocery bills. And they'll play a major consideration in future decisions about where you'll live and work.

Footnotes
1 "Driven to the Brink, How the Gas Price Spike Popped the Housing Bubble and Devalued the Suburbs," Joe Cortright, CEOs for Cities, May 2008
2 "Life on the Fringe of U.S. Suburbia Becomes Untenable With Rising Gas Costs," International Herald Tribune, June 24, 2008
3 "Interest in Urban Homeownership 'Fueled' by Higher Gas Prices," Coldwell Banker, June 13, 20084 "Gas Prices Apply Brakes to Suburban Migration," Washington Post, August 5, 2008.
5 "Gas Prices May Revive Cities," U.S. News & World Report, July 17, 2008