Oil prices have been falling hard in the past week. Barely more than a week ago, a barrel of oil was priced at over $145. This morning it was trading around $127 - a drop of 12.4%. That’s a huge decline in a short time.

But this is a real estate website, right? So here’s the connection:

The price of gas is the single most visible indicator of financial strain in the United States. Even though its statistically true that very few people have significantly changed their driving habits due to high gas prices, it would be untrue to say that those prices aren’t on the mind of virtually everyone.

I’m no commodities market “wizard”, but I do expect the price of oil to continue to fall. And as it does, the price of gas at the pumps will continue to decline. And as that happens, the spirits of American consumers will begin to slowly but surely rise.

How this relates to real estate is as follows: While the average consumer can reasonably say that their decision to be involved in the real estate market is a rational decision based on economics and not an emotional decision, the reality is that the scales begin to tip in favor of emotional involvement in the real estate buying process when there is the perception of improving economic conditions.

That’s one of the reasons the real estate boom happened to begin with - people thought the economy was great and they reflected that opinion in their real estate buying habits, even opting to over pay for their properties.

The more positive emotion that can be mustered in the real estate-buying public - even if that emotion is due to the lower cost of living from decreasing gas prices - the more likely people will be to stop allowing their real estate decisions to be ruled by fear and will instead act based on hope and the evidence of an improving economy.  And that translates to more buying activity.

Summary - As consumer sentiment improves, the real estate market will follow along. And one of the biggest influences over consumer sentiment is the price of gas, which is now falling.

More signs of hope!

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