Rising Commuter Costs Unlikely to Hurt Housing Market
By DANNY KING
For Los Angeles County’s hardiest commuters, it’s not time to panic. Yet.
Despite a hike in gasoline prices that is taking a progressively larger chunk out of family budgets, there’s no sign of a slowdown in the Antelope Valley housing market, according to Jack Milburn, a broker with Lancaster-based HomeBased Realty.
“People are seeing the effect of the prices but they don’t think it’s going to last more than a week or two,” said Milburn. “It’s just not kicking that many people in the butt.”
Still, as pump prices creep past the $2.10 a gallon level and a war with Iraq imminent, there is concern that demand for housing in the Antelope, Santa Clarita and west San Fernando valleys could be hit as the longer-term effects of a price hike take hold.
While a full-scale crash like the one experienced in the mid-’90s may not be in store, a minor gas crisis could spell an end to the run-up in home prices in commuter communities.
Prices for homes on the fringes of the county have risen by 75 percent since 1996, compared to the countywide appreciation rate of 60 percent in the like period, according to DataQuick Information Systems.
“Obviously, the cost of the commute is a factor in somebody buying entry level housing,” said Mike Dwight, president of Ontario-based Forecast Homes, which plans to add 250 homes to its existing Lancaster communities this year as well as another 100 in Santa Clarita. “The working family whose commuting cost rises is probably going to be a little less likely to make that move.”
Indeed, with a minimal employment base in the Antelope Valley and a high percentage of government employees, the majority of its residents commute to the San Fernando Valley and Tri-Cities areas, while about 40 percent drive into Los Angeles proper, according to Milburn.
With gas prices rising about 75 cents a gallon in the past 15 months, an employee making the 75-mile commute from Lancaster to downtown Los Angeles, could be spending close to $100 more a month for fuel.
“The financial stretch gets a bit stretchier,” said Dwight.
The price hike is occurring just as homebuilders are throwing up houses in response to the county’s six-year housing boom. Nearly 1,700 housing permits were issued in L.A. County in January, marking a 66.7 percent increase from the year-earlier period, according to the Construction Industry Research Board. Many of those are in outlying areas with much of the county’s available land.
More than gas prices, the future of the housing market in outlying communities will rely on interest rates and the affordability of housing closer to the city, according to Christopher Cagan, director of research for Anaheim-based research firm First American Real Estate Solutions.
While prices in outlying communities were among the hardest hit in the ’90s home values in the Antelope Valley, Santa Clarita Valley and Agoura Hills experienced 40 percent, 30 percent and 23 percent declines during the last downturn there is little correlation between housing and gas prices.
While an 11 percent jump in statewide gas prices between 1992 and 1993 coincided with a countywide slide in housing prices that continued into 1996, gas price spikes in 1996, 1999 and 2001 had little or no effect on housing prices.
Which is not to say, according to Cagan, a full-blown 1970s-like crisis wouldn’t have a substantial effect on outlying markets.