If gas prices are any indicator of what's going to happen to housing, then home builders should listen to what new car buyers are planning to do.

The latest Kelley Blue Book Marketing Research study says that high gas prices are affecting new-car shoppers to the point that they're changing their spending habits. Nearly half said that they would buy a new fuel-efficient vehicle if gas prices increase much further.

Since October, new-car buyers are eating out less often (53 percent), joining more carpools (15 percent), shopping less for non-essentials (65 percent), and media entertainment (48 percent.)

But interestingly, only 10 percent say they are delaying the purchase of the biggest ticket item -- a new home.

That should be good news for home builders, which has just reported continuing slow sales. The Census Bureau says that March sales were down 8.5 percent from February and 36 percent below the same period in 2007. That's 62 percent below the peak month for sales set in July 2007.

Good news for homebuyers -- inventories rose to an 11-month supply, the most in 27 years, mostly due to competition from foreclosures and existing home sellers pricing their homes more attractively. But prices for new homes are getting more attractive too, having fallen 13.3 percent year-over-year to $227,600. That's the biggest discount in 38 years.

This followed equally sour news from the National Association of Realtors that home sales in March dipped two percent, down over 19 percent from March 2007. Inventories rose one percent and are now at a nearly 10-month supply.

Both the National Association of Home Builders and the National Association of Realtors blamed the credit crisis for discouraging home buyers.

But this too shall pass.

Since the Kelly Blue Book study, oil prices hit $120 a barrel, rice is being rationed at Costco, and food prices are out of control, but Wall Street pundits who anticipate the markets are starting to call for a bottom in housing and in stocks. On Marketwatch yesterday, no less than three articles featured headlines or quotes suggesting that the panic over the credit crunch is over. Housing isn't as nimble as stocks, so it could take a few months.

Published: April 25, 2008

Use of this article without permission is a violation of federal copyright laws.