permaculture

[Toby Hemenway <toby@patternliteracy.com>]

On Aug 16, 2012, at 11:45 AM, Frances and David wrote:

> Food for thought here. Thank you.
> What I am wondering is how might real estate be affected.

The downside outweighs the upside. Mortgage interest is at historic lows, and 
when (not if) rates go up, monthly payments will increase, and that will make 
houses unaffordable at current prices, so prices will come down. Also, the 
economy is so burdened with debt now that credit will probably continue to be 
hard to get (to bring down debt levels) so mortgages will continue to be hard 
to get. And incomes are static to declining. All this puts downward pressure 
on house prices. I see no reason for upside except another bubble. 

In general, things that take debt to own will drop in price. Things that take 
resources to make will go up in price. That's a terrible squeeze.

I think that buying a house as an investment is no longer a good idea. It is 
a place to live. That makes it a wise place to put earnings that you don't 
need to get back as cash, to reduce living expenses--your house and land will 
survive a currency crash.  But we sold our house in 2010 and are currently 
renting (and I own, with the bank, a rental house that is paying for itself). 
Rents right now are lower than mortgages and change far more slowly. Unless 
you badly need that mortgage deduction (which means you are earning more 
money than you need!), I can't see buying a house now. So if I were 
considering selling, I'd do it soon and not buy again unless I got a great 
bargain, or didn't care if the price dropped because it's real value is a 
place to live. I suppose you could try a low down payment and be prepared to 
walk if you have to default, but that's gaming the system and doesn't create 
security.

I know someone who sold his house in 2004 and bought gold with the cash (up 
6x), and rented a small place. They are quite rich now, in gold.

Rural house prices have not rebounded as much as metro prices. I think that 
will continue, as long commutes become less doable.

I think cities, especially those of 25,000-500,000 people, will be good 
places to be unless we have a total chaotic collapse. Resources stay in and 
move to populated areas generally; rural areas will be triaged first for 
power, maintenance, and shipping during scarcity because people and political 
power are in urban areas--its a law of physics (density means short 
connections). You can grow food in the country; you can't do much else 
compared to all that is available in a city. And you can grow food in cities 
and towns.

Toby
http://patternliteracy.com

> I have some very mixed feelings as someone interested in moving out of a 
> lovely town residence and into a country homesteading scenario.
> Wondering how big a risk to sell one's home at this time.
> Of course, it's all just anybody's guess, but I have not seen anything much 
> on this topic at all.
> Anyone?
> Thanks again for this interesting post, Toby.
> Best,
> Frances
>