We’re all feeling the pinch of rising oil prices at the gas pump. We also know it’s impacting business across the country in a variety of ways. But will the soaring costs impact the fragile recovery of the housing market too? Many predict the answer is yes.
“The prospect of a much more expensive commute is beginning to make suburbia look less appealing. As demand for such homes weakens, economists worry that growth in the real estate market — and the broader economic recovery — could be stopped in its tracks.
The oil price spike could hardly come at a worse time for the ailing housing market, which, along with high unemployment, continues to weigh heavily on the U.S. economy. While financial and manufacturing sectors have recently shown strong signs of recovery, housing seems to get worse.
This situation isn’t helped by a lack of demand. For homeowners, the price fall can be a vicious cycle: Falling home values erode homeowners’ wealth, making them more vulnerable to default and foreclosure, which in turn tends to drive nearby home values even lower. As potential buyers see prices fall, they become less interested in making a long-term investment in a home. Until prices hit bottom and a home turns from a sinkhole into a bargain, buyers are expected to show the kind of tentativeness that aggravates a slump.
Oil could make things even worse…”
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