New Year And New Opportunities

written by Jim Hinckley
11 · 16 · 22

Counted among northern California’s famous residents was a fellow named Sam Clemens. He is better known as Mark Twain, the pen name for one of the 19th century’s leadinig authors and humorists. According to legend, while working in Angel’s Camp in the California goldfields, he was asked about mining, prospecting and gaining wealth. As the story goes, his answer was succinct. “Buy land, they’re not making it anymore.”

Regardless of economic downturns, inflation, stagflation or interest rates Twain’s wisdom holds true, especially for long term investors. Historically, even during the post WWI economic recession that led to a record number of bank failures, the years of the Great Depression and the period of soaring interest rates in the late 1970s, cropland, timberland and ranchland held their value. And over the long term, they almost always increased in value.

Unlike gold, stocks and similar investments, land doesn’t often provide easily accessible reserves. It is illiquid, not quickly converted to cash.

Still, land remains one of the best hedges against almost all negative market conditions. A twenty year evaluation and study of the years between 1992 and 2012 by the National Council of Real Estate Fiduciaries indicate that the average return on investment was 11.83 percent. As you may recall, there were several tumultuous periods during these years.

Long term studies indicate that appreciation in real estate will always outpace the rate of inflation. Robert Shiller, an economics professor at Yale University, studied annualized returns on real estate investment for the period from 1928-2021. When compared with annualized inflation during the same period, he found that that the return on investment outpaced inflation by more than 1.5%.

It should be noted that there were several major economic downturns during this period. Aside from the Great Depression there was a two decade period referenced as the Great Inflation by economists. During these decades there were four deep economic recessions, two severe energy crisis that led to soaring interest rates,, and the implementation of wage and price controls.

On average the value of a maintained home doubles in 18 years. That is another example why real estate remains an excellent investment in spite of interest rates.

There is one more timeless adage to consider when looking to purchase property, home or business. And that is the importance of location when buying property that should be adhered to in any market. That is another reason to consider the Redding and Mt. Shasta, California area. for investment or relocation of home or business. Varuious studies of Redding real estate trends estimate an increase of value in excess of 10% over the next five year period.

But for real estate investment a knowledgable team is even more important than location. In Redding and Mt. Shasta, the Lynch Mortgage Team pioneered by Amerifirst Financial has been serving our Northern California clients for seventeen years

Written by Jim Hinckley of Jim Hinckley’s America