The New York Times says, “Rural US Takes the Worst Hit.” They refer to people who need to drive long distances to work…or shop…or go to the movies.

Here in Europe, people tend to stay close to home. Partly because it is a small place…and partly because gasoline is $9 a gallon. But in America, it is not unusual to drive 50 miles to work…or an hour to go to a restaurant.

In Europe, towns tend to be densely populated…with little suburban sprawl. But in America, houses spill out onto the Great Plains…the deserts…and the farmland – far from the city centers.

The suburban movement began in Baltimore in the 1920s. Wealthy families moved up to higher ground, to benefit from fresher air and leafier settings, and to get away from the rabble of immigrants from Italy and Eastern Europe. Later, new immigrants from the South and from Appalachia – during WWII – encouraged another big wave of suburbanization after the war. Automobiles, tramways and low fuel prices made it possible for people to live several miles from the downtown area and continue working in the city.

In fact, the whole country was shaped by low oil prices…allowing people to travel, by automobile, freely and cheaply, wherever they wanted. Gradually, in the ’60s, the process of spreading out, like the bulge in American waistlines, intensified and went down the socio-economic scale. First, the wealthy moved out…then the upper middle class. But lately, the bottom of the middle class has been leading the trend. The lower middle class has been lured to buy big houses in the farthest-out suburbs. Why? Because land costs generally got cheaper as you went further and further away from the city centers. But when this trend was running hot, few people reckoned with $4 gasoline. And now, the people who live at the greatest distance from their jobs are often the people who can least afford a long commute.

But it’s worse than that. The furthest-out suburbs are also those that were built most recently. So, they tended to be sold at the top of the bubble…and they are also often the biggest houses. Not only do their poor denizens have to travel long distances at high fuel prices, they often have subprime mortgages…high heating bills…and have suffered the greatest loss of equity (who wants to buy a distant house when gasoline is $4 a gallon?).

The entire housing industry is in trouble, of course. But so is the whole trend in housing that has dominated the nation for the last 90 years. Suburbanization has run its course; it has peaked out.

KB Homes has already announced that it is going to build smaller, more modest houses. “Downsizing the American Home,” is the newspaper headline.

Meanwhile, the Wall Street Journal tells us that LandSource has gone broke. The company owns 15,000 acres outside Los Angeles. Its largest investor is the California state pension system – Calpers – which has $970 million invested in the firm.

*** If houses planted in dirt are going down, those on wheels are going down even faster. It costs about $350 to fill up the tank of an RV, making the sector one of the worst performing areas of the stock market in the last 2 years. Coachmen, for example, was trading at $20 in 2004. Last week, shares closed at $2.81.

Bill Bonner
The Daily Reckoning