As posted from Bloomberg
House prices in his rural subdivision beyond the Blue Ridge Mountains in Charles Town, West Virginia, have plunged as commuting expenses have soared. A four-bedroom home down the street from his is listed for $239,000, after selling new for $360,000 five years ago.
Homeowners in the exurbs aren't the only ones whose assets have taken a hit because of the surge in energy costs. Companies such as General Motors Corp. are writing off billions of dollars in plants and equipment that are no longer viable in an age of dearer oil. The destruction of wealth and capital will weigh on U.S. growth for years to come.
``Our whole economy reflects the relative costs of energy: the cars we drive, the houses we occupy, the kinds of factories we have and the equipment in them,'' says Dana Johnson, chief economist at Comerica Bank in Dallas. ``I'm expecting relatively large changes in all of these things.''
The loss of wealth could be a double whammy for the U.S. economy. In the short run, it depresses demand as homeowners save more and spend less, and companies fire workers. Longer run, it curbs productivity growth, as firms shift their focus from increasing worker efficiency to reducing energy costs.
$4 a Gallon
The national average price of regular gasoline topped $4 a gallon (3.79 liters) for the first time, AAA, the largest U.S. motoring club, reported yesterday.
``At $4 per gallon gas, $125 per barrel oil and $10 per million Btu natural gas, a lot of activity becomes uneconomical,'' says Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pennsylvania.
The lifestyle of the exurban commuter may be one casualty.
Emerging suburbs and exurbs -- commuter towns that lie beyond cities and their traditional suburbs -- grew about 15 percent from 2000 to 2006, nearly three times as fast as the U.S. population, as Americans moved further out in search of more affordable houses or the bigger ones that are sometimes derided as McMansions.
``It was drive until you qualify'' for a mortgage, says Robert Lang, director of the Metropolitan Institute at Virginia Tech in Alexandria, Virginia. ``You can't do that anymore. Your cost of transportation will spike too much.''
The 38-year-old Marino, an archeologist for the U.S. Fish and Wildlife Service, is among those feeling the pinch. ``Eating out and discretionary income are a thing of the past for us,'' he says.
Declining Value
He reckons he once could have sold his 2,700 square-foot (250 square-meter), four-bedroom house for around $450,000 based on the value of other homes in the neighborhood. Now he figures it's worth about $330,000. Gasoline prices have doubled his commuting costs since he bought his home in 2003, he says.
``Gas prices are really hurting demand here,'' says Celia Lainez, a broker at Keller Williams Rice Realty in Martinsburg, West Virginia. She says she has yet to receive a bid on the house down the street from Marino's, which has been on the market for five months. ***
Because, the average upper middle class citizen drives and inefficient vehicle their discretionary has evaporated to nothing. What always amazed me was how people were able to afford the 200k mortgage and still have money left over. The answer is the Adjustable Rate Mortgage. The good news is people finally reallize; they have to live in their own means.
Tuesday, June 10, 2008
Monday, June 9, 2008
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