High gasoline prices provided the trigger that burst the [housing] bubble,” says
JunJie Wu, an Oregon State economist and one of the authors of a new study that
blames high gas prices as the main culprit for the housing crisis that started
in 2007.
“The theory recognizes the role of subprime mortgages and lax lending practices as
inflating the housing bubble,” Wu says, but adds that a spike in gas prices was
the “trigger.”
The new study, conducted by economists at University of California, Berkeley, and
Oregon State University, attempts to pinpoint the cause of the housing crisis.
The researchers say that while the housing market is blamed on initiating the
2007 financial crisis, researchers have found little consensus on what actually
caused the housing crisis in the first place.
The researchers offer rising gas prices as the main culprit, noting that oil prices
more than doubled between late 2006 and 2008 to $4.15 per gallon.
“The real estate mantra is ‘location, location, location,’” Wu says. “If you find
yourself in a location that is far from work and transportation costs rise
suddenly, that location can lower the value of your house.”
The researchers note that mortgage default rates were highest in commuter areas.
Also, they say that low-income households and suburban homes located away from
business centers were the most vulnerable in the housing crunch.
So will the recent rises in gas prices slow the recovery? Yes, say the researchers,
“especially for communities tied to high transportation costs,” Wu says.
Source: “Some Economists Say High Gas Prices Triggered Housing Crisis,”
RISMedia (April 8, 2012)