Inflation Rate And Cost Of Living Calculator

[Jim Meade / Iowa City]

If you bought land in 1990 for $1100 per acre, it should be worth $2000 today, according the the Bureau of Labor Statistics Consumers Price Index calculator. In fact, it's probably worth $6,000 or maybe even $8,000. Pretty good buy. http://www.bls.gov/data/inflation_calculator.htm If you bought a brand new Chevy pickup in 1971 and paid $2800 for it, you should be able to get the same thing today for a little over $16,000. Hmmm. Not so good, is it? The same pickup will probably cost in the high 20's or low 30's today, but of course you can' t buy it because new ones are so loaded up. There are seven or more ways to figure the rate of inflation, not just the CPI. http://www.measuringworth.com/uscompare/ CPI GDP Deflator Consumer Bundle Unskilled Wage Compensation of Production Workers GDP Per Capita GDP Based on some of the ways to measure, gasoline costs less today than it did in 1947, the cost of the Civil War was about $150 trillion, and George Washington fared pretty well compared with the pay of current politicians. Are you better off now than your parents?

[BA Deere]

There has been a mini "tulip mania" going on with land prices, no question.  90% of the time you buy land you never regret it, even if times are tough the payments seem to get made.  Land prices that should be $2,000, still easily fetch +$8,000.  I suppose "they ain`t makin` anymore of it" and farming is fun and if you own it the landlord can`t kick you off and 9 billion population by 2050 and increased productivity are all excuses for the land-mania.

[OKdon]

What makes you think land should be worth $2000 per acre.? It's like anything else innthat supply demand sets the price. Who will give how much ohn a given day. Most land buyer should know that there are good days and bad days on the horizon. They don't trade land like its on the board of trade. They make long term investments and don't really care all that much if the investment has a down turn at some time or another. They know or think they know that the price direction is up and ifmit cash flows and gets you from 2015 to 2020 it will like be worth more than now.

That is why I keep preaching that land is an intergenerational investment. Just get on board and go for the long term ride. That is why it is important that you cash flow rather than the farm. One day it will be yours free and clear and you will be shopping for more. In fact interest returns are so crappy, you just as well lose money on a farm. Think that land prices are crashing. Buy another one at bargain prices.

Don't look shorterm and don't think short term and everyone makes mistakes. Just don't make one that crushes you>

[BA Deere]

Farm land is different than tulip bulbs for all the reasons that I mentioned.  However, let`s analyze land as an investor without a dog in the fight: Land was $1100 and corn was $2.50 in 1990 today corn is $3.50 and inflation wise in 1990 dollars land should be $2000...now would that unbiased investor really say that land should be selling for $10,000...$15,000...$20,000 per acre?

[OKdon]

That is an answer that everyone must decide for oneself. The scarety cats in the coffee shop aren't going to decide what a farm is worth. It's the chap that has been waiting for half a life time to buy that 80 next door. Like the dude that decides to pay $90K for a mercedes.  He does it because he can.

I'm guessing that the folks buying land at $8 K $9K $ 10K are doing so because they think this down turn is a short term event and they only do that because competition demands it.

Meanwhile if you choose not to get in the fray, that is your choice. Nothing wrong with that decision but somehow you're disappointed that land prices hasn't crashed where you can afford it.

[BA Deere]

I basically agree with you Don, if you pay cash and intend on never selling the land, it makes no different if it drops to $10/acre or goes up to $100,000/acre.  You`re not selling and you don`t have to make payments being as you paid cash.  What else do you do with you money, go to Wally World and buy foreign made pink flamingos?  One caveat though, you might want to vote Republican because Democrats see property owners as a not fully tapped revenue source   😉

But yes, farmland will continue to be a not terrible investment for semi-rational motives.   🙂

[sw363535]

apples and oranges should blend together to make potato soup...

[k-289]

How about the investment group in the corn belt using ag land as an inflation hedge - yellow caution light -experts at work --- 

[OKdon]

I've never bought a farm that wasn't too darn high. But if I bid less I wouldn't own them. All off them paid out in the long run. That is why it is important for the buyer to cash flow. Hopefully profitability will allow you to retire the debt early and avoid some of that long term interest charges. In my case, if I didn't have that craving for new paint in my machine shed I would have bought land sooner. I guess that is part of "growingup".

Making a plan and then having the discipline to carry it out. I've never paid cash for a farm but I have had downstroke money when I did. All that IRA money you were investing, I used mine for land payments because I wanted that cash involved in building my personal business.  

I'm reminded of my neighbor that bought land for $3k per acre just before the crash in the 80s that dropped land price by 2/3s in our area. Well they kept it and paid for it and it is still theirs 30 years later.

[BA Deere]

There are 2 kinds of farmers back then, those that survived it and those that didn`t.  Some were in trouble and open with their banker and saw how underwater they were and just closed the books on their opperation...and I mean I respect that, if they run a tab at every business in town and tapped out their limits at the bank, before it would get any worse, they went to town.

Others got "creative" ...and to not rehash the 80`s again, but let`s just say their modus operandi was "if I owe the bank $100,000 and can`t pay, I have a problem. If I owe the bank $2 million and can`t pay, then the bank has a problem".  

Had the government, under a "conservative" Ronald Reagan mind you, not stepped in and put their thumb on the scale, there would`ve been a very different outcome. And that would`ve definately had an impact on how quickly land prices rebounded.  I mean, if you bailout the highrollers, of course the laws of normal economics will be suspended.  Question is, are farmers still viewed through the "Norman Rockwell" lens as they were in the 80`s?