Symptom of peak oil: Foreclosures higher in suburbia

The suburbs are going bankrupt faster. An NRDC paper has revealed that there is “a direct link between “location efficiency”—a measure of the transportation costs in a given area—and mortgage foreclosure rates.”

In other words, people who live in the ‘burbs are more likely to lose their houses to foreclosure than those who live closer to work and services.

Jon Commers of the Star Tribune cites this reseach in his excellent article, but nowhere does he mention peak oil. He talks all around it; for example:

If access to parts of our region is contingent on cheap, subsidized gas prices, people who buy property are exposing themselves to changes in those prices. If many homeowners in one area do so, the effects can be brutal for neighborhoods.

The foreclosure wave serves to highlight how households, local and state governments are all leveraged by development that relies on cheap, distant commutes to workplaces and services. As we’ve relearned in recent years, leverage works just as swiftly in reverse as it does moving forward.

Excellent points, but missing the key connection that, under peak oil, those neighbourhoods and developments that rely on “cheap, distant commutes to workplaces and services” are never coming back.

This also distinguishes the current recession from previous downturns; this one is not temporary. Oil prices are up, they’re going to trend upward, and this is going to increase the price of almost everything, including necessities like food and transportation – resulting in fewer jobs.

What does this means for housing prices in general?

• Houses requiring “cheap, distant commutes to workplaces and services” are going to decline in value as gas prices go up; i.e., the price of suburban houses is inversely proportional to the price of oil
• Tipping points will be passed in individual subdivisions – have been passed in some cases – where so many houses have been abandoned (and stripped and squatted in and vandalised) that all houses in the area lose essentially all value
• The former subdivision dwellers must move into town, which you might think would increase rents and prices – but these are unemployed people who have just lost their house; they’re broke; large numbers of unemployed people moving into neighbourhoods is considerably more likely to decrease house prices in that area than otherwise

The NRDC paper contains the remarkable statistic that

transportation costs…[consume] roughly 17 percent of the average American household’s income.

In other words, create walkable communities and the four-day work week is here. Which we will need, as there are going to be many fewer jobs to go around.