As Gas Prices Rise Location Becomes Even More Important to Real Estate

Everyone knows that the three most important things in real estate are location, location, and location. Well I have just decided that the fourth most important thing in real estate is...you guessed it, LOCATION! Why do I think that location is even more important now than ever? Because gas prices have just topped $3.00/gallon again here in Philadelphia, and I wish that my home, office, grocery store, favorite restaurant, etc. were all located even closer to each other so I could spend less money on gas and less time in transit between one place and the next.

Not that I can complain - I rarely travel outside of a 5-10 mile radius in a given day, and I often use public transit or walk where I need to go so my personal transportation cost is relatively low. However, for many of us reducing commuting distance would free up a lot of time and money in the family budget. In many cases it could be worth paying a premium for housing that's more "location efficient" - meaning housing located in an area that has all of your daily needs located within walking distance or accessible by inexpensive public transit.

One interesting way to look at this issue is via a Housing + Transportation Affordability Index. These indices show the relative affordability of different locations factoring in both average housing costs and the average amount spent on transportation. As you would guess, urbanized areas like Center City Philadelphia tend to do well on these indices since many daily needs can be met without spending any money on transportation. You can see a map of the Philadelphia region's index here. Another way to think of the same data is in terms of "walkability" - how well can you live without relying on any transportation other than your own two feet. A great website for assessing a neighborhood's walkability is http://www.walkscore.com/.

If gas prices stay high, expect "location efficiency" and walkability to become more and more important in real estate location decisions. On the other hand, maybe we should all just buy land in Texas that isn't very walkable, but has lots of oil reserves under it...