Robert J. Schiller writes on Why Land and Homes Actually Tend to be Disappointing Investments:
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. …
… we need to realize what land represents, even in Manhattan or Silicon Valley or any booming area. People in such places usually aren’t buying land for its own sake but for the myriad services that housing provides. A home is not just a place to sleep and store clothing and keepsakes. It can be a place that is convenient to a stimulating place of work, good schools and entertainment and, indeed, part of an entire human community.
… the slow long-term pace of farmland and home price increases is not surprising. Nor would it be shocking if this trend continued for the next century, despite price surges over the last few years.
A more extreme outcome is also quite plausible. In a hundred years, we might even see much of our former farmland converted back to wildlife preserves. In fact, it’s far from inconceivable that the real price of land could be even lower than it is right now.
You’re investing in a place when you buy a home. You’re not investing in a house. If you haven’t enjoyed your investment, it’s probably because you’re treating a plot of soil or pile of metal, plastic, and wood as if they were more valuable than the place you’ve put them.