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What Makes a Home or Community Valuable?

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Here are some questions to get us thinking:  What makes a home or community valuable?  What makes one home worth so much more than another, even if it’s the same size and quality?

Most people would answer: location.  They would be right, the three word mantra of real-estate professionals everywhere is:  location, location, location.

So what is it about a location that makes a property more valuable?  If you could sum it up in one sentence, it’s a location with great schools (primarily) and fast, secure access to the global economic system (work and stores).

These factors are indicators of future demand, which would make it easier to sell when it comes time to move.

However, what happens when the global economy is depressed or suffers from financial shocks?  Values plummet as we recently saw in the US, with over one in every five mortgages currently under water (worth less than the loan it took to buy it).

They plummet because homes are valued as derivative assets.  They derive their value from their connectivity to global economy.  They don’t have any intrinsic value.

So, if the global system continues to deteriorate as nearly every long term indicator says it will, we can expect nothing but bad news in home values for some time to come.  Traditional wealth accumulation in reverse.

Fortunately, there may be a way out of this trap.  A way that makes our homes and communities increasingly valuable the tougher the situation gets economically.

It starts with the realization that over the vast majority of our history as civilized beings, our homes and our communities derived their value from how much food and energy they could produce.

That changed only recently (by historical standards) as we became increasingly dependent on the global economic system.  Due to this dependence, our homes became hollow decorative assets, devoid of any productive capacity.  Our communities became black holes of consumption.

The way out of the trap of sinking valuations is to make our homes and communities productive assets again.  An asset that can produce food, energy, water, and products.  An asset that feeds us, warms us, and provides for us.  An asset that can, in a pinch, generate us income.

A home like that has intrinsic value.  It has value regardless of what happens in the region, the nation, or the world.  In fact, a home or community that is locally productive actually GAINS (mightily) in value as the global financial system tanks, sputters, and goes into cardiac arrest.

This may not be a merely a cyclical downturn we are suffering.  It may actually be the start of an arduous and tumultuous era of transition from the global, bureaucratic industrial economy of the 20th Century to the local, networked resilient economy of the late 21st Century.   If that is true, getting resilient early is going to save you lots and lots of personal tragedy.

A big challenge of our online community is to find ways to do add this productivity to our homes and communities in economically advantageous ways.

Stay tuned for more and more research of how to make your home a productive asset to your own economy.

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  • Jim

    John,

    I was wondering how you see communities dealing with personal defense against corporate land grabs/neo-feudalism that we see all around the developing world?

    ie No matter how productive or resilient you make your home, if state and/or private police come to take your land for some reason, let’s say massive, unpayable fines for code violations, what do you do?

    This has been happening all around the world for centuries, and how do we in the West defend when it comes to us? The network/media/awareness help, but only to an extent against physical force.

    • johnrobb

      Jim, Definitely. JR

  • pragmatic sustainability

    Herman Daly is always is on target and related to this post.

    http://steadystate.org/uneconomic-growth-deepens-depression/

  • Productivity is key. My friend, homesteader, and organic gardening guru Mort Mather likes to say that the soil is your bank. If you do not make deposits, you cannot make withdrawals. If you have poor soil, you’re going to have a hard time growing food. Organic matter and nitrogen sources are extremely important. I bring in lots of horse and steer manure from local organic farms. I compost. I practice rotations of beans and peas (very good for drying and getting you through the winter). Green cover crops like clover that you can turn under (if you want to till) are also great.

    Composting is especially key. If you can get enough organic matter composting, you can actually take heat out of the pile via a heat exchanger without cooling the pile so much that it stops composting!

    • johnrobb

      Thanks Scott. Good soil is one of the best investments you can make. JR

  • Jeff

    An interesting question, one which I’m currently wrestling with, is, as a home buyer, what are the feature sets I should be looking for in a resilient home?

    • johnrobb

      Jeff,

      Definitely. A resilient home buyers guide. Nice. JR.

    • pragmatic sustainability

      Here was my list:

      Solar access for PV, hot water, crops, passive solar heating
      Prevailing winds and speeds
      Good bones on the home for that specific climate
      Lack of HOAs or meddlesome zoning codes and quality neighbors
      Job market until the collapse or stepped descent
      Infrastructure – broadband, roads water systems
      Rail, River or Ocean access for energy efficient transportation

      • pragmatic sustainability

        Defenses need to be in there too both passive (gray man) and active

      • johnrobb

        Thanks PS> JR.

    • different clue

      Resiliency-minded neighbors. Or at least neighbors who will tolerate your onsite resiliency.

      No feco-cephalic Neighborhood Association to enforce their feco-cephalic Neighborhood Association type rules. What’s the point of having a resiliency-capable house and yard if your envious and spiteful dull-normal neighbors combine to stop and prevent every effort you make?

      • johnrobb

        Thanks DC. Very true.

  • Chuckle, I must be worth billions by now. Seriously, wise words in any economy.
    I live in a small, passive solar, saltbox, on the coast of Maine. I built it, with no mortgage, lumber was cut at a local saw mill, back in the 80′s recession. Heats with 4 cords of wood no matter what the Maine winter throws at us, and we are warm. It really is the basis of being able to take chances on other ventures and allows a real feeling of freedom from the “system”. You think differently.

    Here’s a look see, as well a ongoing, wind, solar, and gardening projects.
    http://www.flickr.com/doninmaine/

    Billions and Billions I say !!

    Don in Maine

    • johnrobb

      Thanks Din. Nice. I use about the same amount of wood a winter and it’s great to keep so many people so warm for so little. JR

  • C

    Near rivers. Near old transit pathways ie rail if you make something. Location still applies the focal point of ‘location’ moves a bit. ClassA soil is location. Etc etc.

    • johnrobb

      C, Transportation matters, Jr

  • hi john Robb can i translate in french to my blog?
    with the original link to your papper?
    thanks for reply

    • johnrobb

      Robert, for you, Ok. JR

      • thank you John
        if I can make known to the French, resilience and your blog its a pleasure

  • Mike Tyner

    Two factors come to mind. First is the makeup of community members, and I don’t mean demographics. It helps to be in a location near like-minded individuals that share your passion for building resilience. If you cannot find enough (or any) people in your community that are willing to get involved after attempting to create a local network, seriously consider moving. If moving is absolutely not an option then you might want to consider recruiting like-minded people to your area.

    The second factor is the political landscape. Bureaucratic issues have already been touched on in a previous post but if you’re weighing options of where to relocate to, it might be wise to put ideological issues aside and research the regulatory burdens that could potentially hinder your progress in areas you are considering.

    • johnrobb

      Mike, Intentional communities help a lot. Not all of us have that luxury. Same with bureaucracy. JR

    • vis-a-vis avoiding bureaucracy:
      There is a book out there listing which counties in the US have no building codes.
      The rub is, they’re usually the counties with very little in the way of water. Maybe one could learn how the Hopi managed to garden in the desert. I think they carried water long distances?
      http://nobuildingcodes.com/

      Another thought is, if you can at all justify structuring your resilient community as a church, they do tend to get zoning breaks sometimes that businesses are not allowed. Also, monasteries were some of the first resilient communities. You could, if so inspired, invent your own creed etc., or just use one of the traditional ones. You would need to have weekly meetings.

      Also, you don’t need to be a 501(c)3. You could be a Free Church, which is unincorporated. That is in some cases preferable, because it eliminates one sword of Damocles the state can have, namely revoking the 501(c)3. They can’t take it if you don’t have it in the first place. Also being a 501(c)3 requires more paperwork and some might argue it mixes church and state a little bit.

      The down side to being a church is, sometimes the municipality doesn’t want to let you sell anything. I stayed at a convent once where the town wouldn’t give the nuns a business license so they “sold” things from their gift shop by taking donations. I can’t imagine Trappist monks not being allowed to sell beer, but I guess they all live in Belgium or somewhere they allow it by tradition.

      • johnrobb

        Thanks PP. That’s useful. JR

  • DC

    Resilience of productivity will be the next level – designing for failure of your backups to the global economic system. Diversified/redundant food, water and energy systems to allow isolated failures without cascading.

    • johnrobb

      DC, Thanks. JR

  • Bucky Fuller

    “other factors, beside productive capacity, that are important to the value of a home and a community”:

    negligible local Infrastructure costs:

    I live within SAFE walking distance to everything in my small city needed to sustain me. For the time being that means the Big box supermarket for food. TRANSPORTATION costs are zero.

    As a person who can only afford to rent, I look forward to the day I can have the STABILITY of controlling my home work to enhance my own sustainable resilience and prosperity on the things that count. Everything I do inside my home runs the risk of being temporary, or mostly a waste of time, as the modifications and actions I would most like to take are counter to the paradigm old economy house owner (Landlord).

    So I guess that in turn makes me realize it is also valuable to acquire a house and be able to keep it from the hands of the monitizers. I need to earn more money, to get away from the need to earn more money. HAVING a HOUSE or Community Domicile would for me be a very important factor as well. After all I don’t need to own these things, I just need access. As it stands in the old paradigm every month I’m just 30 days away from homelessness no matter what I do.

    So in summary I add:

    SAFE walking distance
    TRANSPORTATION costs are minimal
    STABILITY from deprivation of the old paradigm
    HAVING a HOUSE or Community Domicile

    • johnrobb

      Bucky, Sounds like we need to build a home buyers guide. JR

  • “we can expect nothing but bad news in home values for some time to come”

    As a non-homeowner, house prices going down is good news for me! Rent will decrease, the chances of being able to afford one comes closer within my grasp. Still way off yet, but hopefully there will be quite a sink yet. In a survey I have recently conducted of personal economic concerns, negative equity on property was one of the least concerns that people had, so how it is “nothing but bad news”, I’m not sure!

    True about the assets though. People tend to consider homes as assets, but they are only financial assets if you are renting it out to someone else, and earning money through that rent, or using the property’s resources (such as garden) to produce an income, otherwise their just another expenditure.

    • johnrobb

      Simeon, The thing about negative equity and I’ve seen it happen to people in the past (the Texas oil bust in the 80′s), is that you don’t notice it until you have to sell the house (less often, borrow a large sum of money). You end up with a house that you can’t sell and is losing you money every month (low rents) for a decade. Of course, it doesn’t matter much if the laws allow you to take the corporate approach. The corporate approach to a asset that is underwater is to stop payments and let the lender take the asset. JR

    • It’s a good reason never to buy a house in a development where the by-laws and zoning would prevent you from ripping up your lawn and turning it into a food garden, or having a small business run from your home.

    • pragmatic sustainability

      I watched the housing bubble very closely from 2005 to 2009 consuming everything from the bitter blogs to the factual blogs.

      As long as you purchase at rental parity and aren’t forced to sell, the minor trade-off of being underwater but having control of your preps is worth it, for me.

      In many parts of So Cal, rental parity purchases can be made today. Most future price drops in real estate will be from inflation rather than nominal price drops. Government policy is to prop up real estate prices, like it or not.

      • johnrobb

        PS, Underwater usually gets you when you want to move or re-mobilize your financial resources. Good luck. JR

  • Matt Heath

    I think that the long term trend of less and less of the population (in percentage terms) working directly in the agricultural field will reverse. So homes within walking/bicycle distance of farmland will increase in value.
    With the increase in cost of diesel fuel and fertilizer, farm productivity will most likely go down substantially. I am guessing the future will hold a lot more people working mule teams. Those share croppers/day laborers will need to live within the “new” commuting distance, i.e. 3 to 5 miles from the farm they are working on.
    Also, home’s situated within a few miles of navigable rivers will also have increased value. Moving products by water is far cheaper than by land, and that reversion is how I foresee commerce heading in the future.
    Finally, home’s with enough square footage to raise some small livestock (rabbits, chickens, goats) along with room for intensive gardening techniques, will be the bare minimum in the future. I don’t think we can afford the population densities we currently enjoy, in the future.

    • johnrobb

      Matt, you should hook up with Dmitry. He’s planning to become a river shipping service in the future. ;-> JR

  • pkat12

    If there is any way you can pay cash do so. Even a reletively small pice of property can be productive particularly if the house is small, and it will take less resources to heat/cool etc.
    A couple of years ago I had to relocate and I went looking for a community that was what you call here , resilient. I found a little town that is on a major river and still has a working rail yard. It is very bicyce friendly. Things we have: A small lumber mill, a distillery, a a small foudary, and a small fabricating plant, a hospital and a community clinic, a library, and a communtiy garden that grows food to give to the community. You can keep small livestock in the city limits (or even large livestock if you have a big enough place) and if you dig up your front yard and plant tomatoes they put you on the garden tour.
    A good way to be welcomed to the community is to join a civic organization or two. if you are willing to pitch in and help they will welcome you.
    There are people in the city govenment that are working towards self sufficiency but nobody calls it that. ( nice to see city hall sprout the solar panels last year.)
    My spring project (besides the raised bed garden) is to get to know my immediate neighbors better.

    • johnrobb

      PK, Definitely don’t need to call it resilient. Prudent, practical, self-sufficient, etc. works too. ;->

      So glad you found a community like that. Particularly like that bit about the garden tour. Sounds excellent. JR

  • braun electric toothbrush

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  • Auntiegrav

    I’ve been through this discussion about ‘value’ before. It’s really more general and basic than the article has gone to. What it comes down to is whether a home puts people where they are useful to their own future.
    In other words, a town puts people where they can collectively provide for themselves. A farmhouse puts the farmer on his land where he can care for it.
    All the rest is detail that has to be filled in according to the place (defense, common rules, food types (grazing, vegetables, migratory, hunting, etc).
    The main flaw with civilization is that it is a pyramid scheme. The Amish tend to keep it at only one or two layers of existence, but the modern West has built a pyramid into a spike of money, with all resources (labor, raw materials, intentions) flowing upward instead of staying down on the land.
    All roads are paved with Good Intentions, and we know where that leads.
    “Efficiency is the straightest road to Hell.” JHKunstler

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