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permaculture - Re: [permaculture] PCer rush to buy land?

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  • From: Toby Hemenway <toby@patternliteracy.com>
  • To: permaculture <permaculture@lists.ibiblio.org>
  • Subject: Re: [permaculture] PCer rush to buy land?
  • Date: Mon, 23 Jul 2007 15:10:05 -0700

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.

Toby
http://patternliteracy.com







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