When Mindy Myhre decided to move back to the Twin Cities from Denver, she assumed that she'd buy a house in the suburbs with a big yard and an attached garage. All that changed when she started thinking about how much time she'd spend commuting to work downtown -- and how much it would cost to fill the tank now that gas breached $4 a gallon.
"With gas prices on the rise, it confirmed my decision to stay downtown," said Myhre, who works at Globe University's new campus at the IDS Center in downtown Minneapolis. Myhre plans to buy a townhouse at Grant Park City Homes in Minneapolis' Elliot Park neighborhood near downtown, and she plans to walk and ride her bike to work, weather permitting.
High gas prices won't cause financial hardship for Myhre, but she sees no reason to waste money at the pump. "You're spending less money on gas, and you can spend it on other things," she said.
With no end in sight to gas price increases, it's an issue that a growing number of home buyers and sellers are paying attention to as they consider where to live -- even if it's too soon to tell just how many decisions are being motivated by $4-a-gallon gas.
It's a movement, some real estate agents say, that bodes well for city neighborhoods and communities that have easy access to public transportation, bike lanes and other commuter-friendly amenities -- and not so well for many of those bedroom communities that ring the metro area and cater to the increasingly besieged commuter.
Some say this could be the reversal of a trend, begun during the run-up in prices, of buyers trading distance for value.
"It's definitely on people's minds," said Patty Plourde, broker/owner of Exit Realty Imagine in Edina. "When dollars tighten up, consumers move closer to the city. When money frees up, people spread out."
Out for less windshield time
According to results of a Coldwell Banker poll released Wednesday, 96 percent of the 903 agents surveyed said that rising gas and oil prices were of concern to their clients and that 78 percent said those higher costs were increasing their desire for city living.
Susan Evans, for example, says that a grueling commute from her house in Newport to the public relations firm she owns in Minneapolis' Warehouse District has meant too much time in the car, but now that gas prices are on the rise, she and her husband, Erik Reisetter, are in the market.
"Both my husband and I are looking to reduce our commute time, save money on gas and live closer to where we both work," said Evans, who is president and CEO of Evans Larson Communications.
She's shopping for a townhouse or condo in Minneapolis or a first-ring suburb, but like others hoping to make the transition, she's discovering that it can cost more to get similar size.
In Minneapolis, for example, the median sale price last month was $205,587, according to the Minneapolis Area Association of Realtors. In Otsego, about 30 miles to the northwest, the median sale price was $181,266. Certainly, there are exceptions to the rule that comparable prices fall as you go farther, but agents say that higher gas prices have already made it difficult to get buyers to consider many bedroom communities built to attract value-conscious commuters.
Evans isn't deterred. She's willing to swap a smaller living space for fewer $50 fill-ups and less "windshield time." And that's why communities within easy access to other amenities are expected to be more appealing to many buyers.
In Bloomington, for example, the developers of Reflections at Bloomington Central Station are betting the success of the project on growing interest in public transportation.
"The building's adjacency to the LRT [light-rail transit] has been a part of why our site has continued to outperform the market," said Mark Fabel of McGough Development.
The past 10 months, the company has been selling six to 10 units a month. "There is no doubt the LRT was a huge impact on their buying decisions," he said.
The housing market is getting nicked by gas prices in other ways. Several agents say that there seems to be less activity at some open houses, particularly in far-out communities.
Christine Dufour Iverson says that agents from all over the metro area brought clients to tour her house in St. Paul's Macalester-Groveland neighborhood, which is convenient to both downtowns and popular bike commuter paths.
She said that most of the people who have looked at the house or their agents are from a second- or third-ring suburb. During showings earlier this month, only eight of the 17 agents who showed the house were from the nearby area. It was "an unexpected revelation," she said.
Jim Dattalo, a sales agent with Edina Realty in Plymouth, works with many Cargill Inc. employees relocating to the Twin Cities. It used to be that they were willing to live anywhere within 30 minutes to the company headquarters, but now they want a house within a 10-mile radius, he said.
"It's having an effect in all price ranges," Dattalo said. "It's not just entry-level buyers."
Plourde is touting the proximity of Minneapolis-St. Paul International Airport for a listed $799,000 house with lakeshore on 5 acres in Sunfish Lake, in northern Dakota County.
"I'm letting people know that this is close in and you get want you want, you get the space, the land and you're only 10 minutes away [from the airport]," she said.
Bite not big enough?
Not all buyers, however, are willing to sacrifice space for location, and that's why Tom Musil, chairman of the real estate school at the University of St. Thomas, says that gas prices aren't high enough to transform the market by themselves.
"I don't see an abandonment of the suburbs -- low land costs and the extra house they get offset the gas, that's how people adjust," he said. "I doubt that you'll see people make radical decisions. ... They'll bite the bullet and make other sacrifices elsewhere."
David Abele of Edina Realty agrees. He said that gas prices will have to hit $6 to $7 a gallon before it will have a more serious impact on the market.
Nonetheless, it's not just the pocketbook that matters. Fran Davis, a sales agent with Coldwell Banker Burnet who specializes in the downtown Minneapolis market, said many of her upper-bracket buyers are thinking about how they can reduce energy consumption.
"There's so much more concern about the environment that people pay attention to what the impact is, and not just the dollars," she said.
"I can name 10 people who made that choice."
Jim Buchta • 612-673-7376