Richard Green, an urban economist who specializes in real estate economics, makes an interesting estimation:
Over the past six years, the price of gasoline has risen about $2 per gallon. What does this mean for relative urban land prices? Let's say the average household makes five one-way trips per day--for work, shopping, entertainment, etc. Let's also say that the average car gets 20 mpg in city driving. Each mile of distance to work, shopping, etc. is therefore now 50 cents per day per household more expensive than before. A household living immediately adjascent to work and shopping should then be willing to pay $5 per day more in rent than a household 10 miles away compared with six years ago, all else being equal. This becomes $150 per month, or $1800 per year. Assuming a five percent cap rate for owner occupied housing, this translates to $36,000 in relative change in value. Given that the median house price in the US is about $220k, this is kind of a big deal.Professor Green acknowledges that his assumptions are "pretty crude," but his assumptions seem pretty reasonable to me at first glance. And given the magnitude of his estimation ($36,000), even significantly more dynamic assumptions would produce startlingly high results.