Tuesday, February 22, 2011

Fuel prices and real estate prices.

The major economic focus in the news recently has been the rise in oil and gasoline prices:
Benchmark crude for March delivery was up $6.35 a barrel, or 7.4 percent, at $92.55 a barrel in electronic trading on the New York Mercantile Exchange.

"The Middle East will remain the market's focus today with moves in the oil price probably the best single indicator of the market's assessment of the wider implications of events there," said Adrian Foster, an analyst at Rabobank International.

Rising crude prices are a particular worry for investors as they reinforce fears of inflation and raw materials costs. They also stoke worries of a big drop in global demand levels, as experienced in previous oil price shocks in 1973-4, 1979 and 2008.

If you want to know how the fuel prices will affect real estate, look at historical information from the previous "oil price shocks" identified above. The real estate market may react in a similar fashion to those prior periods.

Even though Central Pennsylvania has historically been more stable than other parts of the country, the effects of the ongoing real estate downturn appear to be spreading:
Communities once believed to be immune to the housing crash are now seeing devastation in their cities. Seattle, Minneapolis and Atlanta are among these cities according to The New York Times.

Click here for earlier speculation as to the direction of real estate prices.

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