“The gas price spike popped the housing bubble,” writes Portland economist Joe Cortright in a new report called “Driven to the Brink: How the Gas Price Spike Popped the Housing Bubble and Devalued the Suburbs.”

In the report we see Cortright channeling Jim Kunstler. But Randall Pozdena, an economist with ECONorthwest in Portland, called the report’s conclusions a “spurious correlation,” arguing that the effect of the increase is trivial compared with the cost of home ownership. Pozdena calculates that a $1/gal. increase in gas prices means only $500/yr. more, an amount he calls “trivial” in comparison to other home-related expenses. But what if people see that the trend will continue inexorably up?

Here’s the Executive Summary:

“The collapse of America’s housing bubble—and its reverberations in financial markets—has obscured a tectonic shift in housing demand. Although housing prices are in decline almost everywhere, price declines are generally far more severe in far-flung suburbs and in metropolitan areas with weak close-in neighborhoods. The reason for this shift is rooted in the dramatic increase in gas prices over the past five years. Housing in cities and neighborhoods that require lengthy commutes and provide few transportation alternatives to the private vehicle are falling in value more precipitously than in more central, compact and accessible places.

• The gas price spike popped the housing bubble. Growth in housing prices was fueled by low and stable gas prices from 1990 through 2004. In early 2004, in inflation-adjusted terms, gas prices were lower than they had been in 1990.

• The higher price of gas has most affected suburban housing values. As measured by the change in housing prices over the last year, distant suburbs have seen the largest declines, while values in close-in neighborhoods have held up better, and in some cases continued to increase.

• Those metropolitan areas with the strongest core neighborhoods, measured by our index of relative core vitality, have seen the smallest declines in housing values at the metropolitan level.

• Vehicle miles traveled—a key driver of energy demand and greenhouse gas emissions—are down, reversing a 20-year upward trend.

• The new calculus of higher gas prices may have permanently reshaped urban housing markets. Now that the era of cheap gas is over, demand for development on the fringe is down, and consumer interest and market potential lie in developing and redeveloping neighborhoods closer to the urban core. This trend could lower vehicle miles traveled, reducing spending on energy, stimulating local economies, reducing the trade deficit, and ultimately enabling the nation to meet greenhouse gas goals. This is a huge opportunity for urban economic development if public policy responds. Land use planning that accommodates more mixed-uses in existing neighborhoods and transportation investments that provide people with more alternatives to auto travel can help accommodate these new market realities. Indeed, the regions with these characteristics, in the form of strong urban cores, have been the ones that have weathered the downturn in housing markets best.

“For decades, the growth of suburban housing was predicated on cheap gas. In effect, the low price of gas made sprawl economical. While predatory and sub-prime lending have been blamed for the housing crisis and have certainly contributed to the problem, another economic factor has been almost entirely overlooked in the timing and the geography of the nation’s housing market implosion. The rise in gas prices from less than $1.10 in early 2002 to more than $3 today has dealt a major blow to consumer purchasing power and weighs most heavily on those metropolitan areas and those suburbs where people have to drive the farthest. Indeed, the decline in housing markets is strongly correlated with auto dependence.

“The run-up in gas prices has re-written the calculus of suburban housing economics in two key ways. First, there has been an income effect. Suburban households spend more of their income on transportation, and gas in particular, and have, therefore, taken the biggest hit to household budgets from gas price increases. As a result, they have less income to spend on housing. Second, there has been a price effect. Because distant suburban housing requires more driving, potential buyers are now willing to bid less for houses at the suburban fringe.

“Many of the hallmarks of the current housing crisis will gradually fade in the months ahead. States and the federal government are already enacting curbs on the worst predatory practices and providing some relief to the hardest hit homeowners. The process of foreclosures, though painful now, will run its course. In contrast, the rise in gas prices has fundamentally altered the landscape of urban housing markets in a way that will not quickly be undone, barring an unforeseen collapse in oil prices.

“The new landscape of housing prices and high fuel costs has important implications for public policy. Cities that offer attractive urban living opportunities in close-in neighborhoods, enabling people to drive shorter distances and make convenient use of alternatives to car travel, are likely to be more affordable and economically successful than places that continue to follow sprawling development patterns. Working to promote land use patterns that enable mixed-use development and provide more bikeable, walkable neighborhoods served by transit will provide multiple benefits, including cutting gas bills, reducing the trade deficit and reducing global warming.”