US housing affordability has been a challenge over the last half a decade. The COVID-19 pandemic created such upward pressure on home prices that many would-be buyers quickly found themselves priced out of the market. Interest rates, which jumped to help quell inflation, created even more barriers to affordability. On Long Island, where so many people moved after leaving NYC and the denser areas of New Jersey, affordability challenges have caused many buyers to choose between the home they want and the home that fits their budget.
Now, all that could change under the new administration, which has promised to prioritize oil and gas production in the US. President Trump has tasked federal agencies with reviewing how they can cut costs in-house and lower costs for the American people. Many experts believe that focusing on increasing oil production will be a key component of executing that plan.
How Ramping Up Oil and Energy Production Affects US Housing
Whether it’s a new home being built from the ground up or a full property remodel, energy is baked into the cost of materials from top to bottom. There’s the cost not only to produce something but to transport it as well.
Many construction materials are either directly derived from petroleum or require significant energy to produce. For example:
- Asphalt: A key material in roofing and paving, is derived from crude oil. Lower oil prices can reduce the cost of roofing materials and road construction.
- Plastics: Widely used in pipes, insulation, and fittings, are petroleum-based. Cheaper oil lowers production costs for these essential building materials.
- Energy-Intensive Materials: Products like cement, steel, and glass require large amounts of energy for manufacturing. When oil prices drop, production costs decrease, making these materials more affordable.
If the cost of building materials falls, likely so will the cost of housing. Coupled with the predictions that we’ll see mortgage interest rates hold steady in the mid-six-percent range this year, along with increased inventory of properties for sale, Long Island home buyers may have much to look forward to later this year!
More US Oil Means More Money Going Back to the American People
Prospective homebuyers could also see their affordability challenges ease as lower oil prices reduce costs for everyday essentials like gas, food, and transportation. This allows households to retain more of their income, making saving for a down payment or covering monthly mortgage expenses easier. Additionally, with potential tax cuts under the current administration, buyers may have even more financial flexibility to achieve their homeownership goals.
Increased oil production is also poised to bolster the U.S. economy, fostering greater consumer confidence. A stronger economy often translates to lower mortgage interest rates, creating a more favorable lending environment for buyers. If the cost of housing comes down, interest rates come down, and people keep more of the money they make, they will have more flexibility to get into the home of their dreams instead of settling for what they can afford.
As the U.S. shifts its focus toward domestic energy production, the ripple effects could profoundly impact housing affordability and accessibility. While challenges remain, the combination of these factors offers hope for those dreaming of owning a home on Long Island and beyond. If you want to buy a home this year, let our team put our experience to work for you. Click here to get in touch with us now!
The Pesce & Lanzillotta Team, at BHHS Laffey International Realty
Office: 516-888-9711
Email: info@pl-team.com
