permaculture

["Eugene Monaco" <efmonaco@comcast.net>]

I don't agree with Toby's assessment of rural land crashing, although it's
possible if landowners are highly leveraged with debt they can't pay off.
My experience is that it totally depends on how far out of harm's way you
are.

It's funny that the biggest speculation in housing and build up of new
units, be they subdivisions or condos, is in the coastal regions.  Places
like Palm Beach, FL have lots of high priced houses that folks finance with
interest only loans--where you never pay down the principle.  They do this
in hopes of flipping for a capital gain in the near future. It is in these
types of places where the sub-prime lenders have the most exposure.  I
expect a housing correction due to the factors below in these areas, and
more so because after the next big hurricane season, people will want out of
the bigger coastal cities.  Think New Orleans.  

Many people sat around hopefully waiting on the insurance companies and then
the government to bail them out, and it hasn't happened and it won't because
there isn't enough money or will to do it.  Next time, people will want to
get out earlier.  I think we're living in the midst of mass denial, but as
the idea of Peak Oil and its implications takes hold (albeit slowly) and
converges with climate change as a perfect storm, things will change (albeit
slowly).  The rate of change is debatable and defines the difference between
a slow evolutionary change and a cataclysmic change.

No gloom and doom here, just predictable patterns.  If you live in the
smaller cities on higher ground, you will see a rush on the rural land.
We're already seeing it in the Southern Appalachian highlands and the
Cumberland Plateau.  Here, land is moving up fast, and the problems are in
"services", such as water supply, police and fire, and mountain roads big
enough to drive a huge fire truck up into to protect the new subdivisions on
the mountains.  We've had a fire or 2 here as well as the continent dries
out, so fire is a real concern.  Many of the speculators are Florida
developers advertising to Miami residents.  The developers are not stupid.
They stay at the party while the punch bowl is still around, but they know
what's coming down the pike.



Gene Monaco
Knoxville, TN

>Message: 9
Date: Mon, 23 Jul 2007 15:10:05 -0700
From: Toby Hemenway <toby@patternliteracy.com>
Subject: Re: [permaculture] PCer rush to buy land?
To: permaculture <permaculture@lists.ibiblio.org>
Message-ID: <46A5273D.5010304@patternliteracy.com>
Content-Type: text/plain; charset=ISO-8859-1; format=flowed

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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