There are a few things we may be able to learn about home buying from how we behave when gas prices change. The spring gas price increases and home buying decrease of the last several years are mostly pertinent to investors buying stock in home building companies and commodities traders.
When gas prices spiked, we complained about having to spend so much, and we may have tried to curtail some of our driving time. We still put gas in the tank when we needed to fill it, and we still used our cars and trucks to continue living our normal lives. When gas went from $3.00 to $4.00, we didn't lose money when we filled the tank. Neither did we make money when prices dropped below $3.00, as they did last year.
Home prices and home demand have dropped in the last several years, and that is of interest to people considering investing in businesses that support home building. Homes are not commodities like oil or pork bellies, and they do not change price with the volatility of a commodity. Home values dropped significantly and quickly for a time, and they continue in more of a downward trickle than a gully washer.
The demand for more housing will be affected by the number of new people of buying age and situation, and the attrition of no longer livable structures. Our population is aging, which will buffer the increase in new buyers. There is no indication that there will be a significant change in the rate in which no longer usable buildings need to be replaced. That leaves two probabilities. First, there will be no dramatic change to the supply or demand for homes in the foreseeable future. Second, artificial or social changes will probably not occur in the next several years or more. There is not likely to be a great influx of new residents from other countries who will significantly increase housing demand, and there is not likely to be double digit inflation that will make current debt seem smaller. Supply and demand, and therefore prices, will remain close to their present level for years.
Just as we all seemed to adjust to high gas prices and continued to use our cars and trucks for transportation, we all must face the reality that the market is no longer a down market and prices are no longer low, except when we compare them to a time in history that is only a time in history. Reality is now, and it's here to stay.
There are a number of considerations that many folks have when deciding to buy a new home. Many are valid, such as living in a better neighborhood with better schools, living closer to work and recreation destinations, living in a nicer home with a bedroom for each kid, etc. There are some considerations that are foolish, such as mourning and weeping over the past value of ones home, and holding the false belief that the lost value isn't really lost, that it will return sometime soon.
Just as we continued to drive when gas prices spiked, we have to continue to live and to pursue the lifestyle that we and our families deserve. The time to make a lifestyle upgrade is when you will get the most use of it. That time is now. Low interest rates and low prices for the home you want to buy are icing on the cake and not reasons to buy. The only reason to buy a new home is that you deserve a better life.
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