Reason to change practices or “the cost of doing business?” Agents weigh in on the impact of record-high gas prices.
Out of all expenses Realtors face, vehicle expenses were already No. 1 before gas prices reached their highest level in history this week.
Amid an immediate global response to Russia’s war on Ukraine and inflation soaring to a 40-year high this week, the cost of gasoline rose sharply to $4.19 per gallon, 46 percent higher than the year before, according to the U.S. Energy Information Administration.
The dramatic price hike has prompted real estate agents from California to New York City, where the price gas hit an all-time record of $4.51 a gallon, to reconsider everything from what homes to show, and how often, to everyday errands and other costs of doing business.
Kim Murphy, owner of Murphy and Murphy Southern California Realty, told Inman the surge in gas prices has her worried about the trickledown effect it could have.
“Last night in the middle of the night I went, ‘Oh my lord,’” Murphy said. “Gas prices are going to impact travel, going to impact people who are selling and moving across the country.”
Real estate professionals are now pondering what the spike means for their business, with some trimming the number of homes they tour with clients and others bracing for any unknown number of impacts.
“We’re going to be seeing it in ways that I don’t think we realize yet,” Murphy said.
Some may take into account the direct impact of a top expense climbing so quickly.
A survey of members of National Association of Realtors found agents drove a collective 3.6 billion miles in 2011, or an average of about 3,300 miles annually for business-related driving.
If that number holds true, agents driving a car that gets an average 25 miles per gallon a year ago could expect to pay $378 annually if they drove the average amount. At the current prices, they’d pay $553 annually.
“For me personally, the home prices have kept up with the rising gas prices,” said Alexander Franklin, with the Franklin Realty Group in Placer County, California, where gas costs an average $5.68 per gallon.
Franklin drives a fairly fuel-efficient sports sedan, rather than the 1971 Country Squire station wagon he drives for fun, which he said gets about 6 miles per gallon. His listings are generally within one to two hours of home.
“So to me, proportionally wise, the gas prices don’t really have a huge impact,” he said. “It’s just the cost of doing business.”
AAA research found that 59 percent of Americans said they’d make lifestyle changes once gas prices head above $4 per gallon. At $5 a gallon, three-quarters said they’d make changes.
“One of my sellers had a townhome unit downtown that he has to maintain and has a tenant,” said Felicity Frenk with the Frenk Team in Houston. “He said, ‘It costs me more money to go down there for the rent that I’m receiving, it doesn’t even cover what I need.’ So he’s putting that up for sale.”
Frenk said she’s gone to greater effort to gather more information and filter out homes buyers might not be interested in, rather than touring them all in person.
“You want to be sure, has it been flooded? Any issues with the property? Seller disclosure. Get everything to the buyers. Have them look at everything before we go out to look at anything,” she said. “Instead of 10 homes we can see five homes.”
In addition to agents potentially trimming the number of houses they tour with clients, Murphy said she’s seen more clients touring without an agent.
“I had an open house last week [and] out of the 15 groups that came through my open house, only two had Realtors,” Murphy said.
“It’s going to start impacting other expenses in your business, not just the miles in your car,” she added. “The company that’s delivering water to your office. Their fees aren’t going to stay the same. Supplies, all those things. Everything is going to go up.”
Yolanda Henderson, owner of Henderson and Associates Realty in Atlanta, said she, too, would wait and see whether the rising gas prices would make a direct impact on her business operation.
“The amount of driving I do is the same but of course it’s costing me a lot more this month than last month,” Henderson said.
What she was concerned about is one more pressure put on clients struggling to find homes to buy.
“The saddest thing to me is the fact that it punishes people who are already being punished by the rising cost of houses in this market,” Henderson said. “It’s too early, but I’m definitely concerned.”