Gas Prices Creating Pain For Home Buyers

Pain at the pump for new home buyers: Owners of newly built homes commute 10%–15% longer than the average homeowner, which means higher transportation costs when gas prices spike.

Gas prices are weighing on consumer confidence: Builders and agents in our surveys flag high fuel costs as a fresh headwind on top of already-poor consumer sentiment.

Sunbelt and exurban markets most exposed: Affordability-driven markets like Stockton, Greeley, Tampa, and Dallas show the largest commute-time gaps for new construction owners.

Fuel costs have spiked as a result of the recent conflict in the Middle East. The closure of the Strait of Hormuz has dented global oil supply and sent gas prices in the US skyrocketing above $4.40/gal. as of April, up from near $3/gal. in February and at the highest level since 2022.

45% higher fuel costs today vs. February land disproportionately on new home buyers. New home communities—particularly more affordable entry-level ones—are often concentrated in locations far from city centers and major job hubs, where cheaper land is the only way to make the numbers work. Buyers who intend to “drive-till-they-qualify” often trade lower mortgage payments for longer commutes, and rising fuel costs are making those commutes more expensive.

Many of the hardest hit cities are in the Sun Belt and parts of the South. Drivers in the Nashville metro area, for example, have paid an average of nearly $70 more per month in fuel costs since March 1, at least $13 more than any other city. Nashville has not only experienced one of the largest increases in gas prices, but its residents also tend to drive the most of any major metro area.

Over in Raleigh, North Carolina, gas prices rose less than in Nashville – $1.25 per gallon compared to $1.48 – but also less than in at least two dozen other cities. Even so, the typical resident drives 34 miles per day, pushing up costs for the average person by about $50 per month, the fourth most of any major metro area.

Drivers in Indianapolis, Orlando and Louisville, Kentucky have also faced among the highest increases.

Meanwhile, monthly driving costs in denser cities such as New York, San Francisco and Portland, Oregon have not spiked as much. New Yorkers have paid an average of about $20 more per month in driving costs, primarily because so many rely on public transit instead of driving.

“Cities are designed around the transportation options they have, and the transportation choices people make result from city design,” said Urban Institute researcher Yonah Freemark. “Together they either reinforce car dependence or allow people to get out of it.”

The repercussions of that divide are particularly apparent right now. The 10 metro areas with the smallest impact from rising gas prices have about double the number of people per square mile as the 10 cities where costs have increased the most.

The hardest hit cities by Gas Prices (Gas Cost Increase per Month):

1. Nashville, TN

2. Raleigh, NC

3. Indianapolis, IN

4. Orlando, FL

5. Louisville, KY