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What Will $4 A Gallon Gasoline Do To The Vacation Home Market?

If you’re a real estate agent, do you sell second homes? At what point will high gasoline prices hurt your business?

How far do your clients drive to get to their weekend retreat, summer home or cabin?

Photo above: Weekend vacationers cross Lake Superior aboard the ferry Island Queen.

Crude oil prices topped $100 per barrel today. Industry experts are warning of $4 per gallon gasoline by summer.

My own clients from Minneapolis and Saint Paul drive three and a half to four hours, one-way, to get to the south shore of Lake Superior (Bayfield, Wisconsin area, including Madeline Island). That's a 250 mile trip for many of our summer residents in the Twin Cities, five hundred miles round trip.

Own a second home yourself? If you're lucky enough to drive a car that gets, say twenty-five miles to a gallon of gas (average) on the highway, and you drive 300 miles round trip to your summer home, you'll use twelve gallons of gas just to get there and back each weekend. At fifty dollars or more per trip, it could get pretty expensive for some families to go away for the weekend.

Drive an SUV or pickup truck? A fully-loaded SUV with a family of four, plus luggage and other summer gear, doesn't get the EPA-estimated mileage on the showroom sticker! Towing a trailer, personal watercraft or boat? You may be using more gas per trip than you realize. Poorer mileage makes the hurt seem worse.

What's your pain threshold when it comes to gas prices?

Will families change their summer vacation plans because of rising gasoline prices?

Posted by Eric Kodner CRS, ABR, e-PRO, CLHMS, Madeline Island Real Estate Wisconsin on 02/28/2008 08:18 PM

Comments (53)

madeline island, bayfield, wisconsin, minneapolis and saint paul, south shore of lake superior, island queen

Originally posted at: Madeline Island Real Estate Blog: What Will $4 A Gallon Gasoline Do To The Vacation Home Market?

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53 Comments on What Will $4 A Gallon Gasoline Do To The Vacation Home Market?

FEB

2008

Well, Eric- ...it'll keep me in Wisconsin, probably up your way!

Steve

That's good to hear, Steve!

I think people that have that kind of money to spend it on a vacation home - don't worry about the gas prices. Good luck

Vincent, I truly hope you're right about that! For some folks, it may be the straw that breaks the camel's back. I'm hoping it won't hurt the economy in resort towns and vacation destinations.

Eric, Living on the Outer Banks of NC, we are very dependant on tourism and have found that availability is far more important than price. Most of our vacationers are one tank away from home (D.C., northern Va.) and they're not going to let the added expense stop them from coming down.

Pat, thanks for your area perspective on the subject. It's encouraging to hear your opinion.

Eric - I saw 3.12 for regular this afternoon here in Fort Worth. I think I'll buy a tandem bike and have my client help pedal! Seriously, we really need to do something about this. It's bordering on ridiculous!

Linda, what can we do? We're already turning the majority of our corn crop into Ethanol, which is driving up the cost of grain and it's by-products (including beer). Automakers are turning out hybrids as fast as they can. I agree it's ridiculous and it's threatening what's left of our economy, but what's the solution?

FEB

2008

Hi Eric: Regular here in Fort Worth today... I just filled up... was $2.95 a gallon at Quik Trip. But... by comparison, I think folks in Europe... in some countries... pay over $5.00 a gallon. But... expensive gas put into a Honda CRV that I get 32 mpg is a little different that many folks here in Texas who fill up their Ford F-150's and their regular SUV's... that get half that mileage.

I agree with the comment made above... although this is my surmising. If you can afford a second home or vacation home, you should be able to afford he gas. I hope so. Take care...

Karen Anne -- You know, if I got paid in Euros (like my daughter does), I think I wouldn't complain about paying five bucks a gallon. Their currency goes a lot farther than the Dollar does today.

CBS Radio reported today that we'll all be paying $4 a gallon soon. My Toyota gets 31 or 32 on the highway, but the rising fuel bills still seem pretty hefty.

Eric, We'll adjust. We are not going to let the oil producing nations (OPEC) dictate our way of life.

BTW Gas prices in my area (San Diego) are already amonst the highest in the nation and we still drive.

Bill Roberts

Bill, maybe we'll all be driving cars that run on 80% ethanol soon..

Our price in Minneapolis for a gallon of regular is around $2.99 right now.

Thank You for your recent comment on my blog. I will agree with you on the Bush Admin and credit card companies. I thought it was a crime to allow the law to be changed making bankruptcy more difficult concerning credit cards. After they begged unworthy borrowers to use their credit. The proof will be in the pudding as to how the Dem congress shows us they are willing to take a different stand against the big banks.

Joel Lawson

Joel, thanks for commenting. I hope something can be done about the lack of a national energy policy. High gas prices are a factor that is dragging our economy down and putting pressure on real estate at the same time.

MAR

2008

I love my Jeep Liberty but the MPG is not so great :(

I love my Toyota!!!

Wouldnt you think that if we invaded, conquered and helped out a rich Oil country as Iraq (was) that we may have some better pricing concessions going on from that country????????? How did that work out where our gas has nearly doubled since we went over to find the weapons of mass destruction....?

I think Texas should seperate from the Union and start our own country where gas is $1.50/gallon again!!! Yee Haw

Audrey, it used to make me nauseous to think of the wastefulness every time I filled up the tank of my SUV. I got rid of it and drive a car that gets around 31 MPG on the highway.

Nathan, Texas' remaining oil supply is pretty depleted..what would happen to the price when it's gone? Yee haw.

Gloucester and Rockport (Cape Ann) are a mere 45 minutes north of the Financial District in Boston. I expect we will have a great number of buyers coming into our market this year as we are much closer and easier to get to than Cape Cod (the other Cape). Our population goes from 30,000 year round to about 75,000 in the summer. We have a tremendous second home market. Gloucester was one of the bright spots in Eastern Massachusetts last year, with the median price going up 7%. Not so bad.

As far as filling up....$75.00 yesterday. Sick to my stomach. Should have bought ExxonMobil stock in 2003. Oh, wait, I have a conscious.

I kind of agree with those who feel high gas prices won't affect those who can afford second homes. The main problem is for US.... Those who cover large geographic areas or work in areas where you are in heavy traffic with an idling engine are going to be most affected. I think that may stop agents from expanding their terrain endlessly. I've seen too many people taking listings in areas that are way out of their areas to be wise (for the sake of the client.) It would never occur to me to take a listing in Putnam or Rockland counties - totally different market. But I see it all the time with agents from other counties listing here.... usually at the wrong price and no knowledge of the area.

MAR

2008

I don't think it will effect the vacation home market. I sell in Leavenworth WA and 75% of my business is vacation buyers from the Seattle area. I think a bigger problem is the strength of the stock market. Most of my clients used to have lots of paper assets, but with recent problems on Wall street this "extra" money has dried up. Is this related to $100 a barrel? Of course, but it's not the price at the pump that is changing their mind.

If aviation fuel continues to go up and airlines charge more, then folks might be inclined to vacation closer to home. I would also guess that a weak dollar is keeping folks from heading to Europe. These factors might strengthen the vacation home market.

Well Eric, Sad to say - but the $3.75 per gallon for diesel ended my trip south to Bristol Tennessee this spring. A trip to NASCAR every spring and fall has been the norm for my family for many years. Hauling a 30 Ft Trailer with a Diesel truck that far puts the gas bill up to about $800... now add $625 for a spot to PARK your camper, Race tickets... $600 .... Food.... You get the picture. OH BOY! Bye bye Bristol. Our trip this summer will be to Michigan instead......

I have to say in the past 2 years as prices have increased we have noticed a decline in others traveling far away from home too.

Scott, I wonder if the Hy-line has raised ferry fees to Nantucket and Martha's Vineyard in reaction to the high diesel prices. Our own Madeline Island Ferry Line has done that.

A seventy-five dollar tankful is pretty tough to stomach!

Ruthmarie, I agree with your assessment of the situation. I've spoken with agents lately who are doing business closer to home because of gas prices.

Geordie -- Consumers are really getting squeezed! The weak stock market is even making savers feel poorer. I know Boomers who are constantly griping about seeing the value of their 401(k) shrink as the market falls. Add that to rising gas and grocery bills and it's no wonder consumer confidence is shaky!

April -- I agree that vacationers are doing the math more than ever before. You may not see vacationers taking as many interstate or cross-country trips this year. I'll bet more families will vacation closer to home.

Eric: It's going to keep me a lot closer to my home... that's for sure. My husband and I spend about $100/week on gas.

Jan, I'll bet there are a lot of couples that spend (combined) $5000 a year or more on gasoline. That's a big percentage bite out of a family's household income.

MAR

2008

Eric, I think your state is like MI with tourism and I'm hoping that it doesn't hurt too much because people will stay in our own state instead of long flights. I think you make an excellent point.

I have to Google where Madeline Island is located. I'm curious. Do you live on the island? I'm going to read your past blogs and see if you cover northern island life. Very interesting to me and others I'm sure.

I think there are two very different questions being addressed here with very different answers.

1. Will increased gas prices affect vacation home sales? No, not at all.

2. Will increased gas prices affect how many Americans vacation this summer? Yes, most likely.

In my market, Leavenworth Washington, the average home price is over $400,000. Since the average buyer is travelling 2-3 hours from the Seattle area, I think gas prices would have to at least double before they effected vacation home sales.

Karen, I live in the Minneapolis area, where I have an office (Wayzata Lakes Realty) that deals in primary homes. I also have an office in northwest Wisconsin (Madeline Island Realty) on Lake Superior that deals with vacation properties and second homes. The two offices are 250 miles apart, which is a bit of a challenge, especially during summer!

Geordie, it's good to hear your perspective on the situation. We're beginning to see a few showing cancellations by folks who say that gas prices are discouraging them from considering our area for a second home.

Many of our Island summer home owners drive four hours or more to get to the Island. They also pay ferry fees (currently around $42 for a car with two passengers) which are rising and are linked to the cost of diesel fuel.

Hi Eric it would really depend on how financially comfortable you are. I know for those less fortunate the cost of energy in general has just become borderline ridiculous!

Bill, maybe it has something to do with regional differences. Midwesterners really pinch pennies, even when they're well-off. I have heard some pretty substantial people that own property in the area who gripe the loudest about gas prices.

Many of our summer homeowners drive four or five hours to get to the Island. Then they board a ferry boat and spend sixty bucks or more to bring over an SUV with four people in it (and towing a trailer). They arrive on the Island and see automobile fuel prices twenty to thirty cents a gallon higher than on the mainland. And if they want to climb aboard their powerboat for an afternoon on Lake Superior, marine fuel at the Island Marina is already well on its way towards $4 a gallon!

The middle class is feeling the pinch too, in my opinion. It's no longer just the less fortunate. When energy prices start to cut into a family's lifestyle, they notice. Household earnings aren't keeping up with inflation, particularly when you take into account energy and food prices.

MAR

2008

Eric, Lake Norman is a popular place for second homes...but mostly people stay here ALL summer so gas probably isn't a factor. However, I agree that gas prices are going to curtail a lot of just for fun driving!

Diane, do boaters who recreate on Lake Norman ever complain about the cost of gasoline or diesel fuel for their boat? It's getting pretty expensive to fill the tank on a good-sized powerboat these days!

Hi Eric, this past Friday reg unleaded was $3.55 and Deisel was $3.95 ouch. Last summer when gas prices were much lower I saw a decrease in the number of jet ski's on our lake, and the amount of power boating. I expect to see more of the same this year.

Gary, gas prices ARE affecting how Americans recreate and do business. The CBS Evening News just interviewed a Los Angeles consumer who is "trading down" from his expensive SUV to a hybrid. Expect to see a lot more of that this year too.

MAR

2008

Let's talk about what it's done to Michigan's auto industry that they didn't see the writing on the wall 30 years ago when there were gas shortages and start manufacturing fuel efficient cars.

Not so good for the job outlook.

Hi Eric - Interesting post. I spoke with a MotorHome salesman tonight. He said his business has not been affected that much. His clients are 59+ crowd who would prefer to put their money in the gas tank, travel, and enjoy their own digs. I concur and offered to add renewable energy to their "digs" to make their trips more affordable.

For the younger crowd who is still working and can't afford to get away for extended periods I would suggest the high gas prices coupled with the record buyer's market would be a perfect time to invest in a second home on a lake or in the woods...where ever that buyer's ideal paradise would be. Save some gas and take advantage of great prices on weekend get a ways!!!

PS Eric - $3.45/gallon regular today; $3.99/gallon diesel

MAR

2008

Karen -- Unfortunately, Detroit needed to be dragged kicking and screaming into the era of more fuel-efficient cars. It was the same thing with air bags, rack & pinion steering, front wheel drive and a couple dozen other major innovations. While SAAB, Volvo, Volkswagen, Mercedes, BMW and others were innovating, Detroit maintained their "we know what the consumer wants" attitude.

Mary -- You know, I think the motor home salesman is whistling in the graveyard. There's a tipping point at which gas prices are going to cause a backlash, and it's not far away. The combination of lagging wages and high gas prices has a lot of people trapped in a squeeze.

MAR

2008

I suspect, like many of the other comments that the people who own summer homes can afford the gas, regardless of the prices. I think that many of the rest will need to stay closer to home.

The fear report at 6 and 11 is talking about how much more expensive groceries have gone, gas is predicted to hit $4.00 / gallon, and the oil companies are posting BILLIONS in profit. They've got us by the short hairs.

I know that I'm loving my home office, that I got rid of my SUV and went to a car that gets 50% better milage (and next it will be a hybrid), I generally plan my outings to get as much done in one trip as I can.

Thanks Eric!

Eric, even those who can afford the gas are complaining about the side-effects of high prices. A salesman friend of mine tells me the power boating industry is bracing for a very rough year. And even companies that make personal watercraft (jet skis) and other recreational vehicles (atv's) are suddenly jumping on the bandwagon and getting fuel-efficiency conscious.

Even companies that make private jets and prop planes are working on fuel consumption issues. You could say that someone wealthy enough to purchase a $500,000 plane can afford the fuel. But they're feeling it, make no mistake about it.

MAR

2008

Eric-Thought provoking post. Gas here in Illinois is anywhere from $3.30 to $3.45 per gallon, and that is regular 87 octane. We recently drove to Florida and decided to take our Corolla instead of the Highlander because of gas mileage. Florida gasoline prices are high too.

We have a vacation home in Sister Bay (Door County) Wisconsin, which is about a 5 hour drive from home. I'm hoping that gas prices do not affect its market value substantially because we're trying to sell it. When we moved from the city to the suburbs, we didn't feel as much need to escape to the country any more.

Everything you read on the economy now says that people are cutting back on luxury items, using gift cards to buy clothes instead of ipods, so that probably impacts the second home market as well. The rich, however, are still rich, so high end places will probably continue to sell.

It will be very interesting to see if the owners of second homes start coming less and less. I live on the Eastern Shore of Maryland and many of the homes in Talbot County (where I sell Real Estate) are second homes for people who live in DC, VA and PA. I have to agree that those that can afford the second homes probably do not worry about gas prices. In this area the higher priced homes are the ones still selling. it will be interesting as it unfolds!

Rich -- Your prices are similar to those in northwest Wisconsin and rural Minnesota right now.

I love Door County! I was in Sister Bay just a couple months ago..the Sister Bay Bowl is a favorite place for dinner and of course Al Johnson's is a great place for breakfast!

Several Lake Superior boaters I've talked with are concerned about the effect of high gas prices. I have a feeling tourists will have even worse "sticker shock" when they see the prices at Marina pumps this summer. When filling station prices hit $4, marinas will likely be over $5.

Even my own high-end buyers and sellers tell me they're feeling the pinch. One fellow I know who owns several private aircraft is thinking of buying a Cirrus because they are considered more fuel-efficient than other private planes.

Ms. Sharp -- Thank you for commenting! I'd agree that the effects of high prices upon those who can afford second homes may be subtle, particularly in some areas.

MAR

2008

This may be somewhat tangent to the discussion of gas prices, but I've heard quite a few small churches in the Minneapolis and Saint Paul area have been having trouble paying their energy bills this winter. It isn't just low to middle-income homeowners that can't afford energy. Now, it's becoming a real problem for churches, particularly smaller congregations.

The side-effects of high energy prices go far beyond the high cost of driving.

What is really interesting is that sales are UP for the busiest Perkins Restaurant in the United States, located in Orlando Florida, right in the HEART of the tourist district.... MOST of the tourists are from the UK, where the money they bring is DOUBLED when they get it converted to US Dollars...

I am sure we are going to see a decline in USA vacations this year from
the United States population......

$4.00 gas is going to HIT HARD......

=-/

MAR

2008

Alexander -- I agree that rising gas prices are hitting many people hard already. I have talked with people who work in downtown Minneapolis and who have decided to switch to the bus or other mass transit because they can no longer afford to commute. For a large segment of the public, it's just one more expense they don't need right now.

APR

2008

I just read Maureen McCabe's post on high gas prices

http://activerain.com/blogsview/482401/Gas-Prices-I-m

and found the comments ironic, in light of some of the less worried comments above. What a difference a few weeks can make! In our area, we're already hearing some people say that they plan to curtail their summer travel because of high fuel prices.

We're going to be talking about this all year long. When I wrote this, $4 a gallon seemed imminent. Now I wouldn't be surprised if prices trend up towards $5 a gallon this summer.

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