cancel
Showing results for 
Search instead for 
Did you mean: 
Kay/NC
Honored Advisor

Re: AgPoll: What's your view of land prices?

At some point, you have to figure the pent- up desires to buy more land, which are now being somewhat satisfied by higher grain prices, will have to have played themselves out. Folks who wanted that adjoining parcel all their lives ought to have been able to bid high enough for it now.
Uncertainty on America's credit rating is dragging markets and the overall economy down like a rock. Once Moody's and S&P finally weigh in, and whatever damage that does is done, we will see some sort of a turning point for the better, I hope. Higher interest rates will hurt this foundering economy, for sure, and would impact land purchases decisions.
About the only thing that might continue to drive things up is people looking for a safe place to park money. Doctors and lawyers tend to turn to ag investments for the tax shelter, from what I have seen in past recessions, especially if they enjoy hunting.
0 Kudos
kraft-t
Senior Advisor

Re: AgPoll: What's your view of land prices?

John I shoulda been there to give you encouragement. What were the selling prices.

0 Kudos
fernwood
Frequent Contributor

Re: AgPoll: What's your view of land prices?

We are seeing land for sale in my area that is not moving.  Problem is that investors paid development prices for land and it is selling for ag value.  Pretty big gap between the two. 

 

Row crop land in my area is still selling for about what it has the last couple of years.  It is bringing around $3K -$4K per acre.  The development land I was talking about earlier is priced at $6K per acre and not an acre of it has sold in over 2 years on the market.  One parcel of it contains 24 acres with no road frontage.  It is crop land and is priced at $3800 per acre and has had little interest at that price.  

 

The point I am trying to make is that there is much variation in the way land is selling.  It can vary a lot within a community.  We hear about the high land prices but there is a lot of land in other area's that has not see the drastic increases that some area's have seen.  When the bubble bursts, if there is a bubble, some area's will hurt much more than others.   

0 Kudos
Kay/NC
Honored Advisor

Re: AgPoll: What's your view of land prices?

Pretty much what we see here in NENC, too. About the same market prices for farmland, which is a huge jump in value from four years ago...double or more. Anyone who bought for development ought to be sick right now, with housing starts standing still.I would say for some, it is their turn and good medicine.

I feel about land the way I do about a house. It is meant for a purpose...in our case, farming and growing timber. A house is meant for shelter. If you start to ascribe a lot of other attributes to either one, you are just creating more expectations.

The more you expect from an asset, the more chance it has to disappoint you. For example, with houses, when people,started thinking of them as their nest egg, instead of having savings in the bank, that was an expectation. For many, the hluse's equity growth even became a retirement plan...even dumber. Taking out equity to pay down credit cards and buy luxuries was absolutely insane. All of that would have worked out fine, if everything had gone on as it had pre-2008 mortgage crisis.

Land will be a " good" investment, as long as we think of it as land, and not five other things. Our house is shelter and sanctuary, not an investment.
Our land is our workplace. It is worth way more than we paid for it, but as long as we treat it as our place to do business and
nothing more, we can ignore land values, up or down, and not worry that we paid too much.
0 Kudos
idalivered
Advisor

Re: AgPoll: What's your view of land prices?

don, click on my name and send me an email. I'll give you the account of both auctions. very interesting....

0 Kudos
fernwood
Frequent Contributor

Re: AgPoll: What's your view of land prices?

Think you hit the nail on the head when you said that land/housing expectations should not change.  They are what they are and should be treated as such.  

 

We are still buying land.  Have purchased 2 tracts of cropland this year and am looking at another.  These are not big tracts but they fit in well with our present operation and were priced reasonably based on their ROI potential.  This is not 200 bpa corn land but it is selling for $2500-$3000 per acre.  That price will work for us with $4 corn or $7 corn.  

 

My concern right now is the value of the dollar.  I pulled all my money out of my 401k plan this year and purchased land with it.  I am just not comfortable with the games the Fed is playing now with our currency and do not want to have money sitting there at their mercy.  Might be a mistake on my part but will not be the first one.      

0 Kudos
centralillinois
Veteran Contributor

Re: AgPoll: What's your view of land prices?

Fernwood, everyone's situation is different, but at my age to pull money out of a 401k would cost a fortune.  The only money I have in the stock market is in the SEP and that's my plan for diversification.  There are a couple elephants in the room for land prices. 

 

Interest rates could rise which could dampen markets, but that's unlikely considering that one third of homeowners are underwater and would further depress housing.  I don't think the fed would allow that.  At the end of 2012 estate taxes roll back to $1 million per person.  No one knows what will happen politically but those on the hill have recently shown that they can't be depended on to take the country in the proper direction.  A $1 million dollar limit would put a lot of land on the market in the next couple years.  That could soften the market in a big hurry. 

 

Another possibility is the estate tax in each individual state.  Some state budgets in the midwest are showing problems and an estate tax could provide a needed source of revenue. 

 

As long as there's a line of valedictorians wiling to pay $500 an acre for rent land prices in Illinois show no sign of softening.  There's more upside than downside due to the fact that most land is being paid for with cash.  Both investors and farmers are keeping the auctions full. 

 

If the corn price rolls back to $4 all bets are off.  Highly doubtful, but who knows. 

0 Kudos
Kay/NC
Honored Advisor

Re: AgPoll: What's your view of land prices?

Age is an important factor in any asset management decision. Things you do at 25 and at 55 are generally worlds apart, time being on the side of the former, not so much the latter.

Looking at land prices in the $2000- 4000 range is also a whole different animal than the prices we've seen quoted here for Midwest acres. If people are buying at these levels with cash, then the sky - or the bottom of their pocketbook - is the limit. If people are borrowing to buy, then their lenders have told them just how far they can go in pursuit of expansion.

Cash is a very freeing asset, in terms of choice on how much and where to spend. Debt is slavery, no matter how you cut it, you have to obey your master.

I wouldn't question anyone's decision of re- investing retirement funds right now. I know what I decided to do last wek with ours. Unless it was in an investment paying at least seven percent, it moved to the side to ride things put for a while.

People were so focused on the debt ceiling fiasco, they failed to notice several other troubling economic signs. Europe is still struggling, and reports due pout today will lilkely not offer much hope domestically. Of course, Congress took its well-!deserved break, stranding the FAA, and settig up another epic battle along party lines format return.

Let 's face it: Land will probably be worth more dollars for a while, at least, because every dollar is becoming worth so much less.
0 Kudos
Jim Meade / Iowa City
Senior Advisor

Re: AgPoll: What's your view of land prices?

All the ag economists and the feds are talking about land prices.  As soon as the mass media brings it up, the top is probably in.  Smiley Happy

Here is a wishy-washy discussion based on a study from Mike Duffy, the pretty-darned-liberal ISU professor.

 

http://www.farmgateblog.com/article/land-prices-should-i-buy-that-farm-or-not

 

"Summary:
 Farmland prices are edging higher, driven in part by higher commodity prices, which are a function of Chinese demand and the ethanol economy. However, fewer parcels of farmland are being sold, and farmers are buying over half of farms being sold. Current prices have a strong foundation based on earnings and lower rates of interest that increase its dollar value. Increased interest rates will reduce its value along with cash rents of farmland." 

 

I'm not going to buy farm land unless I win the lotto.  But, I'm very loath to sell, as I figure it's my inflation hedge if things go really bad.  That is, as long as I can pay the taxes on it.  That would be the other nightmare. 

Tags (1)
0 Kudos
Jim Meade / Iowa City
Senior Advisor

USDA survey

"This is from a USDA survey.

 

 "Agricultural Land Values Highlights

The United States farm real estate value, a measurement of the value of all
land and buildings on farms, averaged $2,350 per acre for 2011, up
6.8 percent from 2010. Regional changes in the average value of farm real
estate ranged from a 15.9 percent increase in the Corn Belt region to a 2
percent decline in the Southeast region. The highest farm real estate values
remained in the Northeast region at $4,690 per acre. The Mountain region had
the lowest farm real estate value, $923 per acre.

The United States cropland value increased by $260 per acre (9.4 percent) to
$3,030 per acre. In the Northern Plains and Corn Belt regions, the average
cropland value increased 17.2 and 16 percent, respectively, from the previous
year. However, in the Northeast and Southeast regions, cropland values
decreased by 1.3 percent and 1.1 percent, respectively.

The United States pasture value increased to $1,100 per acre or 1.9 percent
above 2010. The Southeast region had the largest percentage decrease in
pasture value, 8.4 percent below 2010. The Corn Belt and Northern Plains
regions had the highest percentage increase, both 6.6 percent above 2010.

0 Kudos