How Rising Oil Prices Will Affect The Minneapolis Housing Market

I remember in 2008 when gas got to $4.50 a gallon and a few weeks later the stock market and the real estate market crashed.  I have always felt that $4.00 or more per gallon will push most people over the edge on what is and is not affordable.  Right now the supply of houses is a lot lower compared to 2008. So even if interest rates go up to try to lower inflation or if gas prices are high, there are still a lot more buyers compared to sellers right now.  With the uncertainty in the market due to the Russian invasion of Ukraine we could see fewer buyers and more sellers as people are looking to cash out on their equity gains. 

If gas is going to be around $4.00 or more per gallon I think we will see a slow down in price appreciation, but we will also see a slow down in the number of first time buyers that can afford to buy as they have less valuable cash on hand due to inflation.  There will be fewer first time buyers and more of the buyers will be buyers with a lot of cash on hand looking to protect it from rising inflation.  This is a very risky home buying market because prices are so high and construction costs are so expensive, if you buy a bad house that needs a lot of work that you don't know about, you can really take a big hit after closing.  If you are buying I would be extremely diligent in your assessment of the condition of the property and make sure you are getting a grade A property.  From my experience I have noticed when the market is extremely hot and competitive buyers will often overlook problems on a property because they get caught up in the emotion of trying to secure their home in a multiple offer situation.  So you don't want to buy just any house.  Instead you really want to get a great property that will appreciate well in any market.  If you need help buying or selling give me a call.