Freddie Mac: Rising energy prices challenge housing recovery

Energy costs soared on Labor Day reaching a level that is just 25 cents under the 2008 peak, threatening the strength of the housing recovery, Freddie Mac said.

Skyrocketing fuel expenses generally force consumers to reduce spending in other areas, creating negative outlier effects for the entire economy and possibly housing, Freddie noted in its September 2012 economic outlook.

The good news for housing is energy conservation technology has succeeded in keeping expenses down on many modern properties. “And some homebuyers have begun to value newly built houses that have energy efficient certifications,” Freddie said Wednesday. As buyers begin to value lower energy bills, those details could prove helpful to homebuilders who are trying to distinguish their products in a competitive marketplace.

Still, housing is not immune when fuel shocks hit the system. The 2008 downturn, which followed months of escalating fuel prices, illustrated the deep risks involved with sudden energy spikes.

By Labor Day this year, the average price of a gallon of regular gas had reached $3.84, the U.S. Department of Energy said. That 15% spike from July “diverts purchases away from other consumer goods and can forestall business investment spending,” Freddie noted.  

“This in turn can slow the pace of economic growth, and with it the recovery of the housing sector,” the GSE warned.

Still, there are saving graces for housing, namely in the form of energy efficient cars and homes.

Homes built in the past 12 years include technologies that keep energy expenses about 30% lower than those of homes built prior to 1960.

“This is true even after home improvements have been made to many of these older homes over the last quarter century to increase their energy efficiency. And some home buyers have begun to value newly built houses that have energy efficient certification,” Freddie said.

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