Buy A House, Invest In Land

If I were to pick something to quibble with in Ryan Avent’s The Gated City it’s a perpetuation of the American habit of mixing up discussions of the price of houses with discussion of the price of land. A trip to the Texas Hill Country is instructive in this regard, because people own big giant swathes of land that they refer to as “ranches” (how much practical ranching is taking place is unclear to me) that are obviously much bigger than you need to plop down a structure. If you were to buy a ranch, you’d be paying for a whole bunch of stuff. One guy whose place I visited is taking care of a variety of exotic animals on his property, including RJ Reynolds the camel:

A camel is expensive, just like his house looked expensive, and I’m quite sure the fleet of construction equipment and trucks he used to maintain the property is expensive. The land, too, was doubtless expensive. But there are some important differences here. Land is a speculative commodity, comparable to a bond or a stock or oil futures. You might lose money buying Texas Hill Country land and you might make money. The house is more like a bulldozer or a camel. It’s expensive, and its potential resale value is a relevant issue when you’re considering a purchase, but it’s not an investment. Five years from now, your house, like your bulldozer, is going to be older, more broken, and cheaper than it is today. It’s the land the house/bulldozer is on that might be more expensive. That might be because it becomes more desirable as a place to live, or because climactic shifts make the lend better-suited for high-value agriculture, or because oil is found on the property, or because it acquires a better road connection, whatever. There are lots of perfectly ordinary reasons for land to go up or down in price. A house, by contrast, is a large decaying physical object.

In my experience, people living in rural areas are generally clear on the difference here both because land is put to more varied uses and perhaps because more people live in trailers—homes sold separately from land. But it’s just as true in a urban or suburban setting.