Last week a rather important event occurred. The Ford F-Series trucks were overthrown from their throne of number one best selling vehicle after decades of sales dominance. In another sign of the times the cars that replaced the empty chair are fuel efficient vehicles. This is rather important since it appears that we are reaching a tipping point in terms of fuel prices. Every year we hear consumers complain about fuel costs but rarely do anything to change their behavior. It appears the biggest motivator for changing behavior is simply making people go flat broke:

“(Ford) After decades of sales domination, the Ford F-Series was outdone as the best-selling vehicle in America in May by four Japanese cars — a development that symbolizes the difficulty Ford Motor Co.’s turnaround now faces.

The F-Series, which is built at factories in Dearborn, Kansas City, Mo., and Louisville, Ky., represents about one-fourth of the company’s total sales.

In May, F-Series sales plummeted 30.6%, to 42,973, as customers continued to reject trucks in favor of more affordable, fuel-efficient cars.

“It is a sign of the times,” said Jim Farley, Ford’s group vice president for marketing and communications. “But it is not surprising, given the fuel price. We have never seen $4.20-a-gallon gas.”

With the additional announcement that the Hummer line may be sold or discontinued, it seems like we are heading to a new landscape in the automotive industry. In today’s article we are going to examine this trend on how higher fuel prices are hurting places in the suburbs and the trend of buying bigger places in the boonies simply to own a piece of real estate in Southern California. This may be a thing of the past.

Commuting from Temecula to Costa Mesa

Temecula is a city in southwestern Riverside County. In recent years, it has been booming with new home construction. The population has been growing as well over this time:

Much of this population boom was also based on those in surrounding high priced areas that wanted the ability to purchase a nice large sized home, but were not able to afford it in expensive San Diego and Orange Counties. In fact, I know a few folks that make the commute from Costa Mesa and Irvine to Temecula everyday. Their desire was to purchase a new home for their growing family. They were willing to brave the arduous commute each day for the dream of having a large home.

Although these folks are doing well, many others are not. In our case example today we are going to examine how the commute from Temecula to Costa Mesa will cost someone who may have purchased a F-150 in previous years. Here are our basic assumptions:

Auto and Driving Details:

Year: 1999

F-150 XLT supercab

27 Gallon tank

Average MPG: 14

Full Tank Range: 378

Total Commute distance: 69 Miles One-way (138 Roundtrip)

Many of you not from the area may think this is absurd but this is actually a rather common occurrence. Since many folks were in the construction industry (and many simply like trucks) the F-150 is a very common auto here in Southern California. Some bought for necessity and others simply bought because they like the idea of having a truck. Yet this is another example on how people are learning to separate their wants and needs and that is why the F-Series is no longer the top selling line in the United States.

Now let us run the numbers for how much money is spent on fuel each month:

5-day miles driven: 690 miles

Weekend driving: 75 miles

Total Monthly miles driven: (690 + 75) * 4 = 3,060

Current Cost per gallon Riverside County: $4.40

Total Fuel Cost per month: (3,060/14) = 218 gallons needed per month

218 * $4.4 = $961 per month on fuel

Compare this number to one year ago when fuel averaged $3.14

218 * $3.14 = $684 per month one year ago

The cost to commute the same distance went up a stunning 40 percent in one year. At the same time, many of these folks were tied to the real estate industry so you have a double hit. First, more money is going out of the budget for fuel while income is quickly decreasing.

This is why it shouldn’t come as a surprise to you that 15 percent of homes in this area may be bank owned or in some stage of foreclosure:

“(LA Times) From the start — Temecula was incorporated in 1989 — the city was protective of its image.

Residents are prohibited from working on their cars, in most cases, in front of their own houses. Stores that sell spray paint are required to keep it under lock, though graffiti is almost nonexistent. Behind City Hall, there is a “sign jail” full of political ads and business ads that were yanked because they violated Temecula’s strict sign rules.

Based largely on that image, the population has nearly doubled again this decade, rising from about 57,000 in 2000 to 101,000 today — 14 new residents a day.

Today, said Rich Johnston, Temecula’s deputy director of building and safety and code enforcement, as many as 15% of Temecula’s 22,500 single-family homes are bank-owned or in some stage of foreclosure.”

Now you understand why Temecula is down nearly 30 percent on a year over year basis:

Median Price April 2007: $459,000

Median Price April 2008: $329,000

Suddenly a nice new home construction can be seen as an albatross and a Real Home of Genius once you factor the brutal commute. Let us run a quick expense budget for someone that bought a nice home at the peak for $500,000 and is making this commute:

PITI: $3,517 (zero down at 6 percent fixed)

Fuel Cost: $961 per month

Auto Insurance: $120 per month

Housing upkeep (pool, landscaping, minor touch ups): $100 per month

Food: $500 per month

Utilities: $100 per month

Total: $5,298 per month

We’ll leave this budget at a very basic level. I’m sure you can add additional things like cable, cell phones, internet access, and all other items but even at this basic level, we have a budget that consumes $63,576 per year. This budget leaves no room for savings either. Keep in mind that total auto costs take up 20 percent of the entire budget even though our government BLS friends like it to make up a smaller number. Also, we are not assuming an auto payment which if you look around, many new cars are simply leased or under a loan which means folks have another monthly drain on their budget.

Now you see why ridiculously long commutes may be a thing of the past. You can forget about these areas if fuel hits $5 or $6 per gallon. California itself is still trying to reconcile high unemployment and these areas are the hardest hit. It may be time to rethink how city planners organize cities and the cultural obsessions with big cars may be reaching its end.

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