Property Grunt

Sunday, March 27, 2005

Oil Prices

Straight from Inman:

CPI jitters
Surprise, surprise. Oil prices in the outer stratosphere, so today we hear that prices paid by U.S. consumers rose a greater-than-expected 0.4 percent in February, the most in four months, led by higher costs for gasoline, air fares and lodging.
Everyone wants to take one more drink at this party and have one last dance, but time is running out gang. Get real, the real estate market has been unreal for 10 years and now we must face the piper. Wait a minute you ask, what do CPI and oil prices have to do with real estate? Everything, higher inflation is leading to higher interest rates, plus inflation takes more income from home buyers, giving them less disposable income to buy houses.
The cup is half full, sorry.

I concur with Inman's analysis reagarding oil prices but the Grunt feels that oil prices will have other negative affects on the real estate market because higher oil prices also raise landlord expenses.

It is a well known fact that landlords make most of their money during spring and summer seasons while in the winter some landlords consider themselves lucky to even break due to heating oil costs. Those of you who are jumping on the invesment wagon in purchasing buildings be aware that these are one of the monkey wrenches that can be thrown into your cashflow works.