Long Commutes Pushing Down Suburban Home Prices

According to an article by Kathleen Schalch, the nationwide drop in home prices is disproportionately sharp for those houses farthest from employment centers. In Washington D.C., prices dropped an average of 11% in the last year, but have risen in areas close to downtown or public transportation. The more suburban the house, the sharper the drop. Local statistics seem to bear this out - in Austin, the average price per square foot was down 2.21% overall as compared to last year. Most central areas were up (except for Zilker, which was pretty flat), while some outlying areas were up and some were down.

While home buyers have been factoring the high costs of commuting into purchasing decisions, Stephen J. Dubner and Steven D. Levitt (of Freakonomics fame) have been calculating the costs commuters aren't paying. The largest externality associated with driving is not carbon emissions ($20 billion a year) or congestion ($78 billion a year) - it is auto accidents, which cost $220 billion a year. Congestion pricing or a higher gas tax could internalize the externalities, but both are politically unlikely, especially in car-hugging Texas. Instead, the freakonomists suggest modifying auto insurance rates, so that drivers would be charged based on the number of miles they drive and other risk factors more indicative of their likelihood of crashing. If they are right that driving less means crashing less, this could be a win/win for insurance companies adopting this plan and non-commuting car owners. The insurance companies would attract low-risk policyholders and non-commuting car owners would save on their insurance bill.