Of course we all know that there are some folks that can buy and sell real estate and get rich, but for most of us buying land is a purchase, not an investment.
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 ...
Of course we all know that there are some folks that can buy and sell real estate and get rich, but for most of us buying land is a purchase, not an investment.
save for later
“Of course we all know that there are some folks that can buy and sell real estate and get rich, but for most of us buying land is a purchase, not an investment. “
Agreed. That said, I know one can make a lot more money buying and selling property in NYC than buying and selling land, but I just have a visceral aversion to spending the kind of money it costs to buy even a small apartment in NYC, as opposed to several 100 acres somewhere that has natural beauty and or that I can grow food on.
I bought my house to provide an emotional, stable investment for my family - a place where they can be comfortable and get away from the world.
My investment is paying off nicely.
It may also add a few dollars to my bottom line when I eventually sell it. But, should it stay flat or lose some, I have still reaped the benefit for which I paid money.
Time to buy more land and not stock. ROBERT J. SHILLER ??? The root of his name is SHILL?
You also have to factor in the fact that when you’re buying a house, you’re not paying rent. Even when considering maintenance, that’s a major value to you. Over the last 50 years, my investments in real estate have done quite well, thank you NYT.
Yet we never really have had zirp, QEs, and insane trillion dollars deficits...
The land to buy is a big farm with an ag exemption. Then, when developers finally reach your area, you strike it rich. Problem is, only the very wealthy can afford to buy a large farm with an ag exemption and they keep it within a small circle of wealthy friends. You don’t see hardly any “little people” managing to effect the above action.
Seems like its the where,when and how for being a favorable or unfavorable purchase. In my case over the years i would have paid out more if renting vs home ownership but the difference isn’t all that great. Still I would rather own than rent all things considered.
Nice article. Of course homes and land are mainly consumptive for most people. And if bitcoin were around since 1800....
Shiller is hardly someone pushing people into the stock market.
And the returns for renting are?
Owning land is the only REAL wealth. This is a stupid article from a totally discredited source.
That's exactly what the elites want to strip away from us - that feeling of safety and comfort.
This article is at it's core, propaganda.
The elites want us all to live in tiny apartments, and accept a far lower standard of living. Our quality of life and lifestyle is a barrier to their agenda.
Laughable.
1) not all 1915 farmland is now farmland. What about, say, 1915 farmland on Long Island that now sits under Zillion Dollar trendy summer homes?
2) I don't buy the accuracy of the underlying premise. I own a small farm that was in the family in 1915. tax records would indicate that it has increased in value approximately 100 fold since then.
You also have to factor in the fact that when you’re buying a house, you’re not paying rent.
So it would cost me at least an additional $1,300 to live where I live if I did not own it. As it happens I have CDs that contain around what I paid for my home and believe me, I am not getting $1,300 a month in interest from those CDs.
(For full disclosure my property tax is $1,100 a year. I keep the maintenance up on the home but when averaged out it is less than $50 a month. So for me, buying a home has been a good “investment”
Besides, I do not believe anyone should buy a home with the idea it will be a good investment. That could be a factor but not one of the main ones to consider.
I can think of at least one newspaper that’s been a pretty disappointing investment.
White House Cuts Economic Growth Forecasts
http://www.wsj.com/articles/white-house-cuts-economic-growth-forecasts-1468601249
I always find this kind of argument misses a crucial point: that agriculture is not just one-and-done annual crops.
Fruit trees take years to get going. A nut tree can take decades to grow to maturity and then the thing can produce decades (centuries?) after that with little or no input. When it is done producing it is extremely valuable as wood.
This kind of productivity needs time and permanence...like as in your grandfather planted them and your father and you finally reap the rewards.
Why do we think land and homes passed down through the generations in Europe were so valuable? Because it was the cumulative work of generations and it may have insanely valuable mature, productive trees and other things on it that you simply can’t just go out and buy if you wanted to.
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