Dive Brief:
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Demand for suburban homes could balloon if gas prices continue to fall, according to a study by the Brookings Institution and another by economists at the Federal Reserve Board and Goldman Sachs.
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The Washington Post reported that low gas prices, which are at their lowest in 11 years, make commuters more likely to choose to live farther away from their jobs.
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Likewise, one of the studies found that a 10% drop in gas prices correlates with a 10% decline in the number of homes built in those outlying areas. The other revealed that as gas prices increase, home values rise in cities and drop in the suburbs.
Dive Insight:
If the pattern holds true during this round of falling gas prices, builders will turn more of their focus to suburban subdivisions, which could ease the fierce competition for urban land a perhaps make downtown housing a bit more affordable.
But the retreat hasn’t begun yet, and when or even whether it will is uncertain. “It would take time to play out,” Robert Denk, a senior economist the National Association of Home Builders, told The Post. “The builders would have to believe that it is a longer-term phenomenon before they act on it.”