A persistently high gasoline price may collapse the housing market. The basic premise for this comes from "the end of suburbia". While high interest rates may flush out the speculators and those with ARMs, the real deal that "panics" the housing market might be gasoline prices. If we consider: Months of high $ gasoline, say $4.00 (European average is about $5/g). Demand > Supply. Supply is low. We could have another 70s style oil shock. In that case, we would see long lines at the pump. While today we only have to take 5 minutes to stop in, fill up, and leave, in a low oil supply environment, people could wait hours on line. In many cases, pumps would shut down when all the oil was sold out. In some states, there are anti price-gouging laws that prevent pumps from raising prices more than once a day. That means as the supply/demand changes, price is artificially set. We could see supply disappear very quickly here. How does this relate to housing? The hypothesis is that people need to get to work. I think that people would be willing to pay $5/g to commute. Even $10/g. Theyâd pay up for it. But the supply problem is a static one. While Katrina only affected most of the US for a day or two in terms of a supply shock, a persistent problem would cause the problems stated above, preventing people from commuting. If there is no gas, people have to call out of work. People will get fired. Hereâs where people begin to sell their homes not to take a profit, but exodus because they have to â forced selling to be able to get to work. And hereâs where a real liquidity problem could develop. Where there may be literally hundreds of sellers and no buyers. Especially those in the âoutsideâ suburban regions far from the major hubs. When people move closer to their place of work, we may actually see an "irrational exhuberance" top in bubble prices in the metropolitan areas, where people actually work, and a menacing crash in suburban residentials, not to mention commercials. Oh yeah, and letâs not forget general price inflation due to high costs of transportation of goods, heating, etc... Any comments/insights?