According to Mike Holmes, builders like to take advantage of millions of years of natural compaction by digging down to earth that has not been previously dug up and tamped down. If they don't do this there may be problems with shifting. The foundation has to take the weight of the house, but it also has to stand up against the pressure of the earth around it; if a foundation is going to shift, that pressure is what will cause it.
However, once our old house was removed it became apparent that it was in fact built on loose soil with lots of organic matter in it. No wonder the old house sank in one corner. In fact, I watched them dig up the soil in the corner where the old house had sank, and it was black, stank like sewage and contained logs.
In other words, when they built the original house in the 50s, they did not bother dig down to undisturbed soil and furthermore, it looks like they just piled in old trees and other junk to fill up the space. As this organic matter decomposed, it created a void and the house sank. While further sinking is not usually likely in an older home, given the amount of organic material I saw in the soil, it would not have surprised me, especially after we added extra weight to the house with an addition. All in all, I feel a lot better digging the whole place up.
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