Falling gas prices can shorten the time it takes a house to sell and can increase the selling price, according to results from an ongoing longitudinal study by Florida Atlantic University and Longwood University faculty.
Using data from central Virginia and spanning over 10 years of gas price changes and housing transactions, researchers found statistical evidence to indicate that for every $1 per gallon decrease in gasoline price, average time to sell a property decreases by 25 days. In addition, for every $1 per gallon decrease in gasoline prices the average selling price rises by 2.4 percent, which amounts to roughly $4,000 per sold property in the study.
The good news from the seller's perspective does not end there. A $1 decrease is also shown to increase a seller's chances of selling and closing by roughly 20 percent.
"In the event of a forced sale, these odds are very welcomed news for a seller who might already own a second property and must close," explained Ken Johnson, Ph.D., a real estate economist and an associate dean of graduate programs and professor in FAU's College of Business.
Based on these findings, the immediate future looks bright for home sellers.
Following a 42-cent jump in the last two months, gas prices are again falling nationwide as the Fourth of July weekend approaches. Gas prices are down nearly $1 from where they were a year ago, and prices this summer are expected to be the lowest they've been since 2009 "due to stabilizing crude oil costs and as refineries complete seasonal maintenance," according to the American Automobile Association (AAA).
In the housing market, contracts to purchase previously owned U.S. homes reached a nine-year high in May, according to the National Association of Realtors.
"The general downward trend in gasoline prices is really working out well for sellers of property as we enter the heart of the selling season this summer," said Bennie D. Waller, Ph.D., professor of finance and real estate and director of the Center for Financial Responsibility at Longwood University.
Lower gas prices lead to increased consumer confidence, Waller explained, and more disposable income for potential buyers. Similarly, the effort put forth by the listing broker is likely to increase with cheaper gas prices, which means more showings on a particular property.
Although the researchers continue to add data to their testing sample, these outcomes appear to be consistent over time, according to both Johnson and Waller.
"At this point in time, we do not foresee any significant change in the outcomes/numbers as we wind down the study," said Johnson.
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