Posted on 07/18/2016 4:55:40 AM PDT by expat_panama
Buy land: They’re not making it anymore. That often repeated adage sounds like good financial advice.
But over the long run, it hasn’t been. Despite solid price increases over the last few years, land and homes have actually been disappointing investments. It’s worth considering why.
Let’s start by looking at the numbers...
...Over the century from 1915 to 2015, though, the real value of American farmland (deflated by the Consumer Price Index) increased only 3.1 times, according to the Department of Agriculture. That comes to an average increase of only 1.1 percent a year — and with a growing population, that’s barely enough to keep per capita real land value unchanged.
According to my own data (relying on the S&P/Case-Shiller U.S. National Home Price Index, which I helped create), real home prices rose even more slowly over the same period — a total increase of 1.8 times, which comes to an average of only 0.6 percent a year.
What all that amounts to is that neither farmland nor housing has been a great place to invest money over the long term.
To put this in perspective, note that the real gross domestic product in the United States grew 15.5 times ...
...When you add all this together, the slow long-term pace of farmland and home price increases is not surprising... ...it’s far from inconceivable that the real price of land could be even lower than it is right now.
(Excerpt) Read more at nytimes.com ...
depends on where you rent
My ex-girlfriend and I rented an apartment in Queens for $900 a month, sure it wasn’t the best place but it was in Astoria and was three block from the subway.
To buy an Apartment in Queens it would be around 300K plus taxes and commons fees, in some cases would easily be 900 a month by themselves.
Renting can be a better bargain, especially for short term renting, like less than a year like we did.
I was refering SOLELY to the purchase of a single family home. Your down payment of (too much $$$) was 6 times the price I paid for my house in 1965.
There is a vast difference between the “investment” in income producing property and the purchase of a HOME for the family.
I am referring SOLELY to the purchase of a single family home, too. I did not pay “too much” down; I paid the going rate for at least the past 20 years (20%), and yes, when my father purchases our home in 1975 or so, it was only $60,000.
Im not exactly sure of this guys logic. My family bought farm land in 1974 for $500.00 an acre. today it is worth $9000.00 and acre plus we get paid annual income every year for the last 42 years. And when I pass on it will be passed down to my kids not like a company pension that disappears.
I agree. “There are only two kinds of people in this world, those that are slaves and those that are masters. The difference between them is land.”
The mega-construction project around the airport, and the completion of the work on HWY 114 have, for now, eased the brutality of commutes. My 25 mile commute from North Irving to Alliance Airport usually takes me 30 minutes, but that's going against traffic. Otherwise, it would take 45 minutes on most days.
Housing costs are reasonable, and the schools in North Texas are very good.
Elites hate "McMansions", which is why they hate Texas.
I have made a good deal of money on every property I ever bought except for the house I now own. And actually the value has now crept back up to 2006 levels. It likely a bubble so we are going to sell soon. Knowing when to sell is the trick.
Right, I wasn’t factoring in utilities. Still much better than paying rent or a mortgage!
Reminds me of the Beatles song “Taxman”
Don’t forget, you also have $xxx in equity in your paid off house. So not only are you not paying rent on your paid off house, you could sell it and have whatever the sales price in cash.
Over 15 or 30 years, we all paid a lot more than the original price on our houses due to interest and inflation. But the property appreciated in that time too. So in the end, if you buy a house for $100k, pay $180k in mortgage payments over 30 years, get screwed a bit by inflation...and get the benefit of some appreciation, we have a lot to show for it.
Today the house may be worth $250k, and even after you subtract the maintenance etc, you still have SOMETHING. Paying rent for 30 years, you have $0 equity.
The reasonably close-in automobile suburb with a moderate commute is a fine way to live, until it is overtaken by scale. Looking forward, the biggest planning challenge probably falls to the mid-size cities that have not yet hit the commuting wall, and in which road construction still seems like a viable option...
The self-driving car is going to make the more remote suburbs viable again.
If I can doze on the way to work, I don't really care if it takes me 2 hours to get there, and if I can nap on the way home I have just turned my commute into sleeping hours. Sure, one can argue that I could doze on transit, but getting to the station wakes me up for the day. A self-driving car is in my garage and is convenient. Plus, even the smallest car has room for toiletries and a change of clothes, so I can freshen up when I get to work.
I can envision a microwave and a small fridge so at 7:30 the alarm on my phone goes off and I have breakfast just before I arrive at work. Best of all, it pays for itself. When I get there I tell it to go find someplace to park. When I am ready to go home, I summon it with my phone and it is there by the time I have gotten to the exit. Good-bye parking fees, and light rail costs. Good-bye to sitting next to a mugger or a bum on transit.
I see this as a real game-changer. A long commute is transformed from a lifestyle-killer to an almost pleasant experience. And, for white-collar workers, a place to dock a laptop in the car and your cell phone means you can duck out early and still accomplish things on the way home, if an afternoon nap on the way is not your style.
I even went one better since I paid cash for my house. Paid 55K. should be able to sell for 125K. Made a profit and lived in it for 20 years. What’s not to like?
Land value increases fastest near the event horizon of an urban black hole. New development occurs in Republican areas in an expanding ring away from the Democrat areas. It's not rocket science and anyone with some patience can play.
Self driving cars, self flying aircraft, higher speed internet for work, shopping, and play will lead to the old cities draining out and going bankrupt.
Donald Trump will be very good for real estate. He dislikes and will not support Fedzilla bailing out the stock market.
STUPID
The ROI on farmland is the price increase PLUS the profit made farming (or renting) it.
The ROI on a house is the price increase PLUS the saved rent (or rent collected).
Just buying and holding land and housing isn’t a good idea, neither is just holding a bond and not collecting the interest!
And that’s the comparison made.
Ah yes, but would you take out a $120k loan to buy stock? If not, why?
I’ve bought, sold, flipped and rented out homes since I was 26. I’ve never made less than $30K profit on any property, (making a killing on my little farm that I just sold but I knew that 25 years ago), LOTS of tax deductions in-between, and I always had a place to live no matter what. My Dad gave me my first $1K towards a down payment, and I never looked back.
It can be done, but now that my last property is SOLD I’m done with it. I don’t have the time, energy or patience for that cr@p any longer. It’s a younger woman’s game. Never say NEVER, but I don’t PLAN on owning a home again.
And, of course, I’ve always diversified. Stocks, Bonds, property, precious metals. It’s really not Rocket Science once you learn the basics of investing. Buy & Hold pretty much works every time it’s tried. :)
You are exactly right... they don’t want a rental market of any kind that isn’t 100% run by the government. Cities don’t want rich people who have managed to shelter their money from the greedy hands of local government filling up the cities... they want young dumb tax payers filling the citi
No, I would not. Nor did I take out a 120k loan for the down payment. As a matter of fact, the bank would not give me a mortgage if I took out a loan for the down payment.
I owe you an apology!!! I had bought a single family way back in 1965 and reacted only to the much larger amount of money. I should NOT have put in that remark.
It is like my father and mother being so upset in 1949 when my dad’s NEW OLDSMOBILE cost him $2150.00. Today that is the cost of a junk that may not run.
Those states with small populations and a lot of land should create their own version of a “homestead act”, but not with just inexpensive land. With something that might prove irresistible to many people.
A 100 year guarantee of no property tax, inheritance tax, or eminent domain.
And a clause that if the federal government tries to take their land *or* diminish its value through use restrictions, that the state must buy it back at five times its original or current value, whichever is greatest, if the landowner chooses to sell (giving the state a strong motivation to stand up to the federals.)
This act would have severe constraints on it, however.
It would only apply to lots of land between 1 and 5 acres, with the only residence thereon to be the owner’s single family home. And that family must dwell there six months and one day each year. No renters or sublets. No commercial ownership, in all or part, and the land cannot be used as collateral for loan agreements. Nor (as in Florida), can it be taken because of bankruptcy.
I’m sure there are other add-ons that could be made to this deal, so those states would have people clamoring to move there.
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