Executive Summary of the Impact of Fluctuating Gasoline Prices on the Residential Real Estate Market

 

Bennie D. Waller*
Longwood University
wallerbd@longwood.edu

 

 

 

*Contact Author:
Bennie D Waller, PhD
wallerbd@longwood.edu
Associate Professor and Chair
Department of Accounting, Economics, Finance and Real Estate
Longwood University
201 High Street
Farmville, VA 23909
(434) 395-2046 - Office
(434) 395-2203 - Fax

Abstract

Recently, the U.S. has experienced its second spike in gas prices in the last thirty-six months.  At first glance, it would seem that rollercoaster gas prices could only makes things worse for residential real estate markets around the country.  This current investigation examines the legitimacy of this idea.  Said another way, we empirically examine for the impact, if any, of fluctuating gas prices on property selling price and property marketing time.  The results of this analysis indicate that there is no statistical evidence to suggest that fluctuating gas prices have any influence on either property price or marketing time.  Therefore, while there are other issues of concern in today’s residential real estate markets, fluctuating gasoline prices is not a concern.

 Introduction

 These days there seems to be only bad news from the residential real estate markets around the country.  Housing inventories are up and there is ominous talk about a “shadow inventory” crisis.  Foreclosures are at record levels creating a selling process that few understand.  A credit crunch is restricting lending to the point that otherwise credit-worthy buyers cannot find financing.  All of this uncertainty creates a general uneasiness among buyers and sellers, which further complicates the marketing process leading to generally unhealthy residential real estate markets.

 Recently, the U.S. has experienced its second spike in gas prices in the last thirty-six months.  At first glance, it would seem that rollercoaster gas prices could only makes things worse for real estate.  Is there any statistical evidence to support this fear?  If so, what are the implications?  If not, what does this mean to residential real estate consumers (buyers and sellers)?

 The data for this research consists of observations of residential properties on the market between July 1999 and July 2009 and comes from a multiple listing service (MLS) from south central Virginia.  The initial data consists of 21,514 observations. After culling for incomplete, missing or illogical data that suggest data entry errors, the final data set consists of 21,273 observations which are used in the analysis.  There were 13,150 sold properties with the remaining 8,123 either expiring or being withdrawn from the market.  A data Variable Legend is provided in Exhibit 1.  The data collected from the MLS include typical property characteristics (square footage, bedrooms and baths) as well as market and calendar information (location, list dates).  In addition, gas prices were collected from the Department of Energy records and are an average monthly price per gallon for the state of Virginia.