[permaculture] PCer rush to buy land?

lbsaltzman at aol.com lbsaltzman at aol.com
Mon Jul 23 18:34:19 EDT 2007

This is certainly true where I live. The value of the more urban areas have not dropped as much as they rural areas which are in a freefall with no bottom in sight.

-----Original Message-----
From: Toby Hemenway <toby at patternliteracy.com>
To: permaculture <permaculture at lists.ibiblio.org>
Sent: Mon, 23 Jul 2007 3:10 pm
Subject: Re: [permaculture] PCer rush to buy land?

Another reason for the housing bust is rising interest rates. The price 
of houses over the last 20 years tracks the cost of borrowing money 
almost perfectly. The real cost of a house is not the sale price but 
what it costs you per month in a mortgage--that determines how much you 
can pay. At the traditionally average interest rate of 7.5 percent, 
$1000/month allows you to borrow about $100,000. At the recent 5%, you 
can borrow about $200,000 for the same amount. So let's say you buy a 
$450,000 house, borrowing $400,000 at $2000 per month. Then interest 
rates shoot up to 8% or so. For someone to buy that house from you for 
$450,000, they'd need to come up with over $4000 per month. Good luck 
with that. So housing prices collapse, or, more commonly, since people 
can't stand the idea of "losing" that much money, people decide not to 
put their houses on the market, and the market cools off immensely.

I'd be surprised if people moving to rural areas "to live more 
sustainably" is a very big factor in the real estate market. For one, 
rural people use more resources than urban: move to the country and buy 
a bigger car and a truck and live in a much bigger house, mow a bigger 
lawn. And the percentage of people moving into intentional communities 
is a tiny, tiny fraction of home sales. I suspect "living more 
sustainably" is just the latest buzz phrase for the same old reasons 
that people have always moved out of cities: to slow down, to get out of 
the noise and dirt, to raise kids in a safer place.

I'm still thinking it's the wrong time (top of a bubble) to buy rural 
land. When oil prices skyrocket, all those exurbanites won't like their 
$150/week gasoline bill and huge heating bill, and will flood back to 
short commutes in the city. Then we urbanites can sell our houses for a 
mint and live truly sustainably in all that cheap rural land.


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