It is true, there is a finite amount of land available on the planet. And, as with any commodity, the more scarce it becomes, the more valuable it becomes. Just from that quick snapshot, it would make sense that land would be a good investment, right?
While that may be a common thought, as it turns out, land, and the homes that sit on it, may not be that strong of an investment after all. Take farm land, for example. As Robert Shiller writes in The New York Times, the real value of American farmland has increased only 3.1 times, according to the Department of Agriculture. That is an average of a 1.1 percent increase each year. Meanwhile, during this same time period, the gross domestic product in the U.S. grew 15.5 times, or an average of 3.2 percent each year.
Not only that, but as technology and farming technique continue to improve and farmers are able to produce crops that yield more food from a smaller area of land, the price of this land could actually begin to trend in the opposite direction.