Fuel rise affects homes

Bigger houses, in distant suburbs, become less affordable


Skyrocketing energy costs could affect where people live and how big their houses are.

"An extended period of higher energy prices could slow fringe suburban growth and dampen demand for big houses with their outsized heating/cooling bills," according to Emerging Trends in Real Estate 2006, a national survey taken by the Urban Land Institute and PricewaterhouseCoopers.

The survey was released this month at the fall meeting in Los Angeles of the global research and education institute.

"High gas pump prices and suburban congestion are stimulating interest in urban alternatives," the survey said.

Another conclusion: "On top of projected rising mortgage expenses, increased gasoline and home-heating costs might tip the affordability balance for many people away from home owning to apartment renting at infill locations closer to work."

Real estate experts said recent design trends, such as homes with soaring entrance foyers and other energy consuming features, will exacerbate the sting.

"We're overbuilt with big housing, and if we have a bad winter, some owners of behemoth houses may want to sell because of high energy bills," said Steve Hovany, president of Strategy Planning Associates in Schaumburg, Ill.

"As energy costs rise, there will be less enthusiasm for owning big houses. When energy prices shot up in the 1970s, big-barn houses went out of favor. It could happen again," Hovany said.

Though Hovany noted that insulation is better today, "even so, two-story ceilings may be too expensive to heat."

Higher energy costs won't just affect individual houses, but also the geographic boundaries of development. "If gas prices go way up, there is no doubt people will be reluctant to go farther out," Hovany said.

Another ULI survey revealed the impact of gas prices on consumer behavior. Of the 1,000 respondents, 87 percent said they have made a change in their commute and non-commute travel behavior because of the rising cost of gas. Most combined several stops in one trip.

The national survey was conducted the first week of October by Harris Interactive Inc. Gas prices were seen as the third- greatest concern of Americans, after education and crime/drugs. Down the list was the economy, the war in Iraq, air quality and traffic congestion.

"The findings of this survey clearly show," said Edward McMahon, senior resident fellow of ULI, "that consumers are rethinking how much money and time they are spending getting from one place to another."

John Handley writes for the Chicago Tribune.

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