Greenbook: A Local Guide to Chesapeake Living - Issue 3 | Page 28

By Ken Holman, CCIM, CPM, REIA

Almost every day, I hear
advertisements about buying
gold because it is such a great
investment. As I have heard these
claims, I have wondered how real
estate stacks up to gold as an
investment.
Surprisingly, some correlations exist
between buying gold and buying
real estate. Both investments are
considered a good hedge against
inflation and fluctuations that occur
when the government overspends
and the Federal Reserve weakens the
value of the dollar. Both have intrinsic
value, meaning their price never goes
to zero like some stock investments
have done. Both are considered
long-term buy-and-hold investments.
Both require insurance to protect
against risk of loss. Both claim to
offer price stability, meaning their
prices are less volatile than stocks.
Admittedly, over the past 40 years,
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GREENBOOK | SEPTEMBER - OCTOBER 2014

gold has performed extremely well.
From 1974 through 2013, gold
increased in value from $158.93 an
ounce to $1,356.30, an average annual
increase of 5.51 percent. From 2006
through 2011, when real estate was
experiencing its worst performance
of the past 40 years with an average
annual decline in value of -2.19
percent, gold was soaring at an
average annual increase of 17.30
percent. During that period, gold
increased in value 260.42 percent.
Gold seems to perform better
during periods of economic decline
when stocks are experiencing a bear
market.
However, from an appreciation
perspective, over the past 40 years,
real estate has more than held its own,
increasing an average annual rate of
5.43 percent, which includes the great
recession years of 2006 through 2011.
From a pure appreciation standpoint,

gold beat real estate over the
period from 1974 through 2013 by an
average annual appreciation of 0.08
percent, a virtual dead heat between
average gold prices and average
prices of new home sales.
Unlike gold, however, appreciation
in value is not the end of the story
for real estate; it’s only the beginning