No Longer Nomads: The History of Real Estate

For almost half of human history, our ancestors moved with the four-legged food supplies of their respective areas, leaving only traces of their lives in the form of cave drawings, stone weapons and tools, and other artifacts.

Over time, our ancestors gradually abandoned the hunter-gatherer lifestyles. This transition period spanned between 30,000 BC and 15,000 BC. The change, though far from global, marked a major shift toward an agrarian society. It also heralded the advent of homeownership in a country that was eager to establish settlement from east to west. In this article, we look at the original investment, the birth of homeownership, and real estate as we know it in the United States today.

Key Takeaways

• Human culture evolved from nomadic tribes and wandering shepherds.
• The advent of private property and land ownership set the stage for the modern system of real estate.
• Homeownership was primarily associated with the elite—those who held power and wealth.
• The rise of the middle class and financing has made it possible for people to achieve the dream of homeownership.

Staking Claim

Many agrarian systems progressed in a very similar fashion. Fertile plains were staked out and settled in a might-makes-right manner, meaning those who could defend the land were the ones who kept it. Eventually, a system of tribal leaders developed, and those who had the approval of the tribe would disperse lands, settle disputes, and require payment from all their subjects.

The shift toward more and more powerful tribal leaders culminated in a pooling of labor, along with a chief executive officer (CEO) of sorts to direct efforts. Irrigation channels were dug, strongholds were built, farming methods improved, and temples were erected.

With the land improvement, populations exploded. Where a family of hunter-gatherers might be able to support one or two children at best, farmers could provide for several children. The increased fertility also meant greater numbers of available laborers.

The Original Protection Racket

Hunter-gatherers also followed a tribal system, but scarcity and the uncertainty of life meant that a tribe could only support two or three extended families. The amorous farmers, however, soon found that they could not name everyone in their tribe anymore. In return for the sacrifice of familiarity, people living in these small societies gained the safety of numbers.

A well-fed army easily repelled any desperate raiders. In return for this security, the people all paid homage to the lord or king who claimed ownership of the land. This was essentially the first system of rent.

As these farming villages grew into cities, the leading families maintained ownership by right of lineage—their ancestors were the ones who clubbed all other challengers senseless—thus becoming the kings, pharaohs, daimyos, and sundry heads of other feudal dynasties.

Note

The Louisiana Purchase was the first major real estate transaction made by the United States. The French sold Louisiana to the U.S. in 1803.

All Hail the King

This system of labor-for-protection developed into two separate systems in most countries: taxes and tenancy. Royal families spread their wealth to friends, signing away titles and deeds to lands that allowed the holders to collect the revenues or rent produced by the peasants living there.

On top of this rent, all the people within a ruler’s realm were generally required to pay a tax. Many other demands were made by the ruling leader, such as military service. These demands were grudgingly met because the rulers owned the land not only by birthright but by military might as well. Rulers could be overthrown by other rulers (sometimes by peasants). At times. a new ruler would sit on the throne and the average peasant would rarely notice a difference.

But it wasn’t all bad news for the peasants. They were able to trade with other kingdoms and the general level of wealth increased, giving rise to a merchant class as well as specialized laborers or tradesmen who were able to earn a living through skills other than farming.

This, in turn, resulted in non-agrarian shops and houses that still paid rent and taxes to the various lords and kings, but were bought, sold, and rented among the common folk rather than by the royal class. Richer merchants became the first common-born landlords, gaining wealth and status. These merchants didn’t own the land, but they owned the houses on it.

The King Is Dead

Many aristocracies were eventually displaced, often via the displacement of an aristocrat’s head from the body. This was done by putative meritocracies or systems in which the truly best and brightest lead a nation for the good of all.

What happened instead was the creation of politics. Title lands were broken into smaller parcels and sold on a free market of sorts, but the people with the money to buy the deeds were either merchants or former aristocrats who managed to escape being shortened by revolutionary fervor. Peasants had yet to make much progress from the original farming-tribesmen of 30,000 years prior.

Important

The Homestead Act of 1862 was signed by President Abraham Lincoln and allowed Americans to purchase and settle 160-acre plots of Western U.S. land. About four million claims were laid as a result of the law. The act was repealed in 1976.

The Age of Machines

The Industrial Revolution was one of the great equalizers in human history, perhaps only matched by the invention of firearms. The effects of industry were neither positive nor negative but depended on application. The use of machines for manual labor freed many peasants for different tasks and allowed a privileged few the time for education and specialization into new fields of labor opened up by the mechanization of industry.

Cobblers, seamstresses, and cabinetmakers found that their once invaluable skills were now obsolete, leaving them to return to the land and the coal mines beneath it to try to eke out a living.

People with ambition were able to jump classes and bring some of their low-class sensibilities with them, leading to tract housing for laborers and a range of products aimed at the lower classes. People were now divided into the middle class, blue-collar, white-collar, and a handful of other social categories. They owned houses, cars, and, eventually, radios and televisions, which suggested what other things they might want to own.

Magic Mortgages

The invention of mortgages belongs to no particular country. Mortgages existed for a long time as exclusive loans given only to the nobility. After the Industrial Revolution, however, the wealth of the world increased to the point where banks opened themselves to “higher-risk” mortgage loans—those made to common people. This allowed individuals to own their own homes and, if they so desired, to become landlords themselves.

It took 30,000 years, but homeownership is now open to almost everyone. In fact, it reached the point where people often buy too much or take out too much of a mortgage.

The freedom to own something can be a heady brew, so it is important to practice moderation. Taking on too much debt by way of a mortgage can help you lose a house as readily as a loan will help you own one.

When Did Owning a House Become Common?

Homeownership is part of the American Dream. In fact, the rate of homeownership has increased significantly since the 20th century. But the idea of owning a home arose among agrarian societies, where it was considered an advantage to own family farms compared to acreage that was rented from capitalist landlords. Settler societies planted the roots of homeownership, which were furthered by policies enacted after war and conflict. Policies aimed at helping those returning from combat to settle into society made homeownership not only a possibility but also a reality.

How Did Real Estate Start?

The real estate industry traces its roots back to the late 19th century. But it didn’t begin to take shape as we know it until the early 1900s. The National Association of Realtors was established as the National Association of Real Estate Exchanges in 1908 in Chicago as a way to expand real estate matters. The industry went through a series of evolutionary changes to include investment properties, flipping, and online sales.

How Did Land Ownership Develop?

Land ownership is deeply rooted in human history. Early tribal cultures (and still many of them today) used the land and its resources for sacred reasons only as needed rather than for economic ones. Rights to land were transferred between generations. It wasn’t until early agricultural societies formed that people began to settle land. The ruling class recognized land ownership as a way to hold onto and increase its power and wealth.

When Did Real Estate Become an Investment?

Fluctuating property values have made real estate a very popular investment for many people. But real estate investing isn’t a new concept. Renting land to tenants became commonplace in the early days of the United States, followed by a surge in real estate after the Great Depression and World War II. The federal government enacted legislation for investors to generate income from real estate investment trusts in 1960, which led the way for people to buy and sell properties for profit. But it wasn’t until the recession of the 1980s that real estate investing actually took off.

The Bottom Line

Ownership, specifically the ownership of land, was the basis of all the investment opportunities we see today. Without a stable population and a set location, trade and commerce between groups is limited. Ownership has moved from being established by strength to being something you can buy, sell, trade, and rent.

There has always been a trade-off for tenancy—a fee paid to the owner for the land and its protection. This responsibility was first afforded to tribal leaders, then to kings, and finally to landlords. Now we have the power to own our homes—a development that has changed the way people live.