Robert Shiller, Nobel prizewinner and Yale professor, says that land isn’t the best place to grow a savings nest egg because technology changes the ways people use property.
“Despite solid price increases over the last few years, land and homes have actually been disappointing investments,”
he writes in an op-ed for the New York Times. “In fact, it’s far from inconceivable that the real price of land could be even lower than it is right now.”
He points to data that show farmland prices haven’t kept pace with economic growth while home prices have advanced a meager 0.6 percent a year in the past 100 years. Gross domestic product is 15.5 times bigger than it was in 1929, when the U.S. started keeping track, which translates into growth of 3.2 percent a year.
“Because of technological advances collectively called the Green Revolution, there has been something akin to a long-term supply increase” in arable land, he says, pointing to advances in fertilizer technology and crop science that have helped farmers grow more food without requiring more land. In addition, milk and meat may be created in laboratories of the future, eliminated the need for livestock.
Another trend is toward smaller-sized housing units that provide basic amenities and the proximity to urban areas.
“We have recently seen interest in ‘micro-apartments,’ which may be little more than 200 square feet but manage to squeeze in a kitchen, a bathroom and an entertainment center,” he says. “For many people, this tiny space, with its proximity to like-minded people, interesting neighborhoods and restaurants, is preferable to living in a house in a far-flung suburb.”
Meanwhile, homebuilder optimism slipped this month, while their outlook for new homes was still positive. The National Association of Home Builders/Wells Fargo builder sentiment index fell one point to 59, in line with the average reading this year.
"Job creation is solid, mortgage rates are at historic lows and household formations are rising,"
Robert Dietz, the NAHB's chief economist, said in a statement. "These factors should help to bring more buyers into the market as the year progresses."
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