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House hunting in the age of $4 gas

Analysts say commuters may move closer to work

Email|Print|Single Page| Text size + By Noah Bierman and Kimberly Blanton
Globe Staff / June 22, 2008

Gas cost just over $2 a gallon in October 2006 when Derek Benoit bought his condominium in Amesbury in the far northeastern corner of the state. Now he's trying to sell the unit, even though he just finished renovating it.

With gas now $4 a gallon, the software executive is no longer willing to pour $500 worth into his tank each month, an expense he attributes mainly to his 34-mile commute each way to work in Wilmington, or farther, to Logan International Airport for out-of-town meetings. He is looking to buy a home closer to his employer and the airport.

"I love, love, love my place, so it's bittersweet," Benoit said. But the commute is "just getting too expensive."

Benoit's decision may seem like an extreme reaction to soaring gasoline prices, which have forced many commuters to modify their driving habits. Some are making fewer trips, and others are trading in gas-guz zling sport utility vehicles for compacts or taking mass transit to work. The US Department of Transportation recently reported a record drop in the number of miles Americans drove in March, compared with March 2007, which amounted to a 4.3 percent decline.

But if gas prices continue their inexorable rise, commuting costs will become a critical factor in where people choose to live, according to transit specialists and economists. Most will probably not take as radical a step as Benoit and relocate; instead, the next time they have to move, for a job or a bigger house, proximity to work or mass transit will be a much bigger consideration.

The first dramatic changes would probably occur for those in isolated suburbs and exurbs: the New Hampshire resident who commutes 50 miles to Boston or the Framingham resident who drives 20 miles into Kendall Square in Cambridge.

"When gas was cheap, it was financially possible to live out in the exurbs and the outer reaches of the suburban ring and commute in," said Mark Zandi, chief economist for Moody's Economy.com. "That's where we'll see the largest impact from the surge of commuting costs."

There is little evidence of a migration by homeowners seeking to lower their gas costs, but there are signs that more are thinking about it.

In a survey of its agents by real estate brokerage Coldwell Banker, 81 percent said they are seeing more interest from prospective buyers in urban living because of high gasoline prices. Fifty-four percent said access to public transportation is more important to their clients now.

A May study by CEOs for Cities, a research organization supported by government and business, said rising gas prices would push new housing developments closer to the urban core in Boston, Seattle, and other US cities, while suburbs with few transit options will lose value.

"The market for higher-density development in close-in neighborhoods is likely to grow stronger," the report said.

Young families might settle for tighter quarters closer to the city instead of the larger, less expensive homes with long commutes. For suburban professionals, a more expensive condo in downtown Boston might make financial sense. And baby boomers might consider giving up the family home because higher gas prices eat into their retirement savings.

Daniel Gustafson and his partner, Paula Parker, are buying a home in Milton that abuts the Red Line's Mattapan trolley. Gustafson realized he could ride the subway to work at the Massachusetts Institute of Technology in Cambridge rather than drive his van, as he has done for years. That sold him. He calculated this would save about $200 a month in gas, after subtracting the cost of a subway pass.

In Melrose, Linda O'Koniewski, owner of Re/Max Heritage, reported a surge of interest in recent months in the compact city, which has three commuter train stops. It also offers easy access to a short highway commute into Boston and a quaint downtown, with restaurants and clothing and arts and crafts stores, to which many residents can walk.

Melrose's housing market is still slower than last year. But one indication of a turnaround is that the supply of homes for sale in Melrose has dropped sharply, to half the inventory for surrounding Middlesex County. Buyers "are making different life decisions because of the economics of energy," O'Koniewski said.

The town of Scituate, which is along the new Greenbush commuter rail line, had 77 home sales between January and May - 10 more than the same period last year. No one knows whether the sales were influenced by lower commuting costs, but the numbers are suggestive.

Economists and housing analysts said there is no specific level at which gas price increases will prompt people to move. Instead, as prices rise to attention-getting levels - up, say, 50 cents or a dollar - more people will reexamine their living situations.

But moving isn't necessarily the right answer, especially now. The outlying communities where commuting costs are hitting hardest are also experiencing a larger decline in real estate values. Closer-in communities have fared better in the slump. For those looking to relocate, that would mean less money for the home they're selling and more money for the one they would buy.

Close-in communities also often have higher property taxes, and the act of moving is an enormous and expensive undertaking.

Jeff Glew, director of the East Coast office of The Concord Group Real Estate Advisors, said gas prices are high enough now to influence those who have to move for a job change or other reasons. But he said gas prices would have to be as high as $8 a gallon before the savings from a shorter commute will compensate for moving to a more expensive, closer-in community.

For Benoit, moving closer to his Wilmington employer is unlikely to save him any money because housing in the area is more expensive. Among the communities he is considering are Medford and Woburn, which would both cut his daily, round-trip commute to 10 miles from 68 miles, saving him $163 a month at current gas prices, according to calculations by The Concord Group.

But in Woburn, for example, the median condo price is $250,500; at that level his monthly housing costs, including taxes, would increase $228. If he chooses Medford, where the median price of a condo is $310,000, his monthly housing costs would increase by $615. That doesn't include the costs associated with buying the home and moving.

Benoit is unfazed, saying the tradeoff makes sense for him.

"Even if I end up spending more money, I'm spending it in a smarter way," he said. "I'm investing in real estate. I'm not pouring it into my gas tank."

Blanton can be reached at blanton@globe.com. Bierman can be reached at nbierman@globe.com.

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