The Oil Factor

We have addressed the price of oil several times in the past year or so. Thus, we should have had most of the issues on the table. However, each time we speak about the price, a few months later, the price of oil goes down again. First, we must say, that we don't feel that the price of oil will go down forever. While we are not trying to predict the bottom, it is likely to come sometime this year, if we have not seen it already.

In the short run, the low price of oil helps many consumers and therefore helps the economy through increased spending in other areas. At the same time, companies in the energy sector will suffer layoffs. Also, some regions of our country will suffer, as well as many countries that depend upon oil revenue for their economies. If oil prices rebound, the effects will be short-lived. But if oil stays low, the effects will become long lasting, including the affects upon consumer behavior.

For example, the type of cars people purchase. Especially now that cars have become more fuel efficient, expect to see more SUVs and larger cars on the road in times that gas prices are low. In the long run, if the price of gas stays low, it may also affect home buying habits. With prices rising to unaffordable levels in many central cities, it is predicted that many will again look to the suburbs for lower cost housing. And lower gas prices may very well facilitate this trend in the long run. It is expected that if millennials move to the suburbs, they will be looking for developments that resemble conveniences of cites, such as town centers. Thus, the price of oil bears watching for many reasons.

Mike ErvinNMLS # 282715W.J. Bradley Mortgage
mike@mikeervin.com
www.mikeervin.com
(650) 451-7797
(650) 766-8500