GMAT Essays (AWA)

The following appeared in the personal finance section of a popular magazine:

“The average price of an acre of land in the United States is now 50 times what it was in 1970, and nearly 200 times what it was in 1920. The nation’s population is projected to keep increasing, even as the amount of land remains constant. Therefore, people who are approaching retirement should invest heavily in real estate in order to ensure their financial security.”

Discuss how well reasoned you find this argument. In your discussion be sure to analyze the line of reasoning and the use of evidence in the argument. For example, you may need to consider what questionable assumptions underlie the thinking and what alternative explanations or counterexamples might weaken the conclusion. You can also discuss what sort of evidence would strengthen or refute the argument, what changes in the argument would make it more logically sound, and what, if anything, would help you better evaluate its conclusion.

YOUR RESPONSE:
The argument states that people approaching retirement should invest heavily in real estate in order to ensure their financial security. This claim is based on how much expensive land compared to the prices in 2 of the years historically. The argument is not persuasive as it misses out key points.

Firstly, the magazine writers do not mention anything about the corresponding increases in the purchasing power of the US population. It might be true that the price of an acre of land is 200 times of what it was
in 1920, but the purchasing capability of people might have increased by greater than 200 times of what it
was in 1920.

Additionally, the prices in the year of 1920 and 1970 might have been an aberration. The argument makes no note of whether the prices in 1920 or 1970 were taken during a stable pricing environment for real estate. Those years could have been aberrations for the real estate market, and comparisons would incorrectly point to an exaggerated claim.

Furthermore, the magazine writers provide no information how other comparable investments such as stocks have done in the same time frame. A similar argument can be made for investment in stocks if the returns have been equal or greater. Traditionally stocks have been the better form of investment given any historical time frame.

Although the argument projects the population to continue increasing, it makes no such claim on real estate prices. Indeed, there is no guarantee provided for the returns on real estate investment, so the author's proposal of investing heavily does not seem to make for sound advice.

In conclusion, the argument is not convincing enough to persuade people approaching retirement to invest heavily in real estate. If the argument were to provide additional information about the historical data of real estate prices, projected increases in real estate as well as returns on comparable investment instruments, it would be more convincing.