Real estate returns

Over the years, real estate has proved to be about as lucrative as investing in
the stock market. Whenever the U.S. has a real estate downturn, folks question this historic fact. However, just as stock
prices have down periods, so too do real estate markets.
The fact that real estate offers solid long-term returns makes sense because
growth in the economy, in jobs, and in population ultimately fuels the
demand for real estate.
Consider what has happened to the U.S. population over the past two centuries. In 1800, a mere 5 million people lived within U.S. borders. In 1900, that
figure grew to 76.1 million, and today, it’s more than 310 million. All these
people need places to live, and as long as jobs exist, the income from jobs
largely fuels the demand for housing.
Businesses and people have an understandable tendency to cluster in major
cities and suburban towns. Although some people commute, most people
and businesses locate near major highways, airports, and so on. Thus, real
estate prices in and near major metropolises and suburbs generally appreciate the most. Consider the areas of the world that have the most expensive
real estate prices: Hong Kong, San Francisco, Los Angeles, New York, and
Boston. What these areas have in common are lots of businesses and people
and limited land.
Contrast these areas with the many rural parts of the United States where the
price of real estate is relatively low because of the abundant supply of buildable land and the relatively lower demand for housing.