Land prices?

Anybody think the run up in land prices the past couple of years is kind of like the .com bubble was a few years ago?

Like the land prices in the 1970's? Like the housing market of the 2000's? like personalcomputers in the 80 and 90's? In my mind yes it is, but probably won't go bust like some of the other examples just lose momentum and some prices when all the speculaters sell out when they need the cash for other investments.

I don't know about a bubble but I think a good chance of price erosion. A few things to take into consideration is the chance the government raises interest rates to in part make its debt more palatable to debt holders. Also, at some point the government will have to impose serious taxation as another means to address debt which will wring previously discretionary money out of the economy.
Of course when you have a multitude of so-called experts trumpeting land prices have no place to go but up is the perfect time to be scared of a bubble. The reasons change over time but price corrections will happen. Heavy foreign investment would help stem that but do we want extremely heavy foreign investment here. Also, the heavy spenders tend to be late middle age and older. As they exit the market it will fall to the younger generations who will have less disposable income so therefore they will have less to bid on things such as real estate.

There"s a big difference between now and the 80s. Primary thing is lenders are not making loans based just on collateral. Buyer needs a substantial amount down, and adequate cash flow to make the payments, plus a cushion. Not the risky loans of before. Why did the housing bubble burst? Homes sold with nothing down, unverified income, improvements financed by equity. With 20% down, the buyer has more incentive to live within means to make payments.

I recently remodeled a house and found some newspapers from 1902. The Sioux Falls Argus Leader from SD was the paper. Land was advertised for from $11-13 an acre. One improved 1/4 was advertised for $40 an acre. Up in the Bismarck area, someone had sections of land for $13 an acre. Corn was .50 a bushel and they talked about yields being in the 50-60 bu. an acre. Lots in Sioux Falls were going for from $150 to $450 each. Lots of interesting stuff in there. It was a Nov. 6 edition and the election must have been just over as it said the nnalert had swept it. "In Kansas City, black voters were selling their votes for $2 to nnalert. Some nnalert offered them $3 and a fight broke out."

Everything I own is in land and I sometimes wish I had bought in to something else as I haven't been gaining in the last few years. Been losing as a matter of fact.
On the other hand, like they say about gold, land will never be worth Nothing - unlike some of the .com stock people have owned.

Nowdays a vote costs at least the price of a pack of Newports.

Yes, I think that there is a land price bubble. There is land selling around me for over $10,000 per acre. So it takes $6 corn and 200 bushels just to make it flow with the current low interest rates. So if any of the three things;1) corn price 2)Yield 3)interest rates, change then the buyers are going to be sunk.

I was just talking with my banker on this very issue. Bare land selling for $10,000 per acre. Even with a 30% percent down payment the bank is still loaning $7000 on land that was around $4000 just 4-5 years ago. My local bank will not loan out more than $3500-4000 per acre on any bare farm land.

When did farm land here in Iowa first sell for more than $2000 ???? Anyone guessing???

1928, That is right. Ever hear of the roaring twenties??? The whole economy was boiling up. That same land was foreclosed on in 1931 and sold at sheriff sale for $55 per acre.

It took until the late 1970s for that same land to get back to $2000 per acre. Then the farm crash of the 1980s hit much of that ground was foreclosed on and sold at sheriff sale for $500-600 per acre.

It bounced back faster this time but went much higher. I am a believer in cycles in economies. So that high priced ground can very easily come back down. Many of the guys buying the high priced ground now did not get to feel the pain of the 1980s. They may very well feel a lot of pain in just a few years. Lets talk $3 corn and see how that ground look then. $4 corn will break most of them.

Land prices have gone to extreme highs here since the European monetary crisis. Land is safer than cash.
Farms selling for over $10,000 acre for land that will never exceed 150 bushels of corn, no matter how much fertilizer.

Right now land is selling for prices that are betting on grain prices rising in the future not what grain grown on them now is worth.When grain prices fall as they always do the land prices will fall right along with the grain.And there will be lots of farmers that are 'underwater' as they now call it in the housing market,owe more on the land than its worth and won't be able to make the payments.

Land prices are WAY too high. In turn (here anyway) they raise property taxes just because your neighbor got some idiot to buy his land for an inflated price.

history repeats itself . I am almost 50 and remember the last time the bubble busrt. Will it this time ??? I am not betting one way or another sure hope corn price doesn't go back to $1.80 but that would make a difference in land value. Land price, purchase or lease always determins profitability.Paul

I am not saying it won,t come down some , but current purchases in my area are people WITH the money no loans involved. Now if the taxes get where they can,t afford it might change things but lots of money going into ag and forest land in this area. Just almost impossible to get any kind of ackerage for less than $ 7,000 an acre. Seems most prices here are related to what the land will produce but just rather who wants it the most..ie. does it join what I already have or have market potential.

Not really the same thing as the house bubble. That was people buying what they in no way could afford. You do not get a return off of a house- or like a fancy speed boat or such. Unless you buy it to re-sell, and that is what caused the problem. Land does bring a return or investment value . Most of the land sales are by people that have the money. Ups and downs of course, but long run I would rather have the land. Look at it this way: Land is not high, it's money that is low and worth less.

I think it is all over. Here a couple years ago, everything within a few miles of st cloud was bringing $6000+, feilds, woods didnt matter. Just this past week I snoozed one day to long and lost out on 40 acres with a mix of pasture, hay feilds, tillable, some low, and some wooded, with a house that needed carpet, sheetrock repairs, a big pole garage, a 16-32 loafing shed. $50,000. about 8 miles from me, I am 7 miles from St cloud

I think they may fall off some, but do not think we will see bankruptcies and price falling like in the 80s. Most of the investors are paying cash for the land, or financing smaller amounts. The banks are smarter now and not allowing the huge leveraging.

Yes. It's already coming down here. The farm south of me,80 acres,just sold for $1750 an acre. Assessor wasn't positive yet,but she thought the assessments were coming down to $1900 this year. We'll know at the end of the month.

Grain prices have a significant effect on land prices, as they go so goes bare agricultural land. And commodities prices cycle up & down to some degree.Look at ethanol as one influence on corn price. Experts say about 39% of corn produced in this country ended up in those e plants. Not saying that is good or bad, just saying.You can watch how many of those plants continue to need corn and keep buying. Right now gasoline demand is 5% lower that it was the same time last year. Means less ethanol is needed. Some e plants might have to do a temporary shutdown if gasoline demand stays down, probably lower price of corn. Then other things like growing season weather affect prices and that cannot be predicted. Like previous posters said interest rates will play a role.To a degree what is brewing over in the Mideast with Iran will affect gas demand, prices and filter down to ag commodities then to land. Too many variables to say with certainty but reasonable price land may be in our past now.

You're leaving politics out of the equation. It wasn't anything in the markets that caused the last huge crash,it was Jimmy Earl Carter. That happened in one speech in one evening. Everything was plodding along fine and then WHAM,that useless SOB hit us right between the eyes. We never saw it coming.
I'd bet anything you wanna bet the same kind of thing will happen again. Just like the cow that stole Christmas in 03. Mark my word,it'll happen fast and we won't even see it coming.

Wow, that seems like a good deal. Sorry you missed it. I ended up passing on that land I posted about last month. Seller was not workable at all on some minor concerns, so I just decided I didn't need a headache, and I believe that is what I may have gotten if I had proceeded to the point of purchase.

last farm sold here in ky lost 42000----owner had it 3 years---not a real good return on inout for him ---next one to sell will be worse probably will lose 60-80 grand

What payments? Most are paying for it with cash. Most farmers in our area are running at least 2000 acres and the sellers are dividing up the land into 80 acre parcels(cousins divided their 550 acre farm into 5 separate parcels to sell) Even with land prices as high as they are, it is nothing for a 2000 acre farmer to come up with the cash to buy 80 acres. 2000 acre farmer grosses nearly 2 million dollars a year. So they can pay cash for land as easily as you and I can pay cash for a new living room set.

It ain't moved to this part of Ky yet.

Two weeks ago three 100ish acre farms sold the next county up from me. The three averaged 7,000 an acre. Last week a 120 acre chunk of ground, 40 tillable sold here. A guy bought it for $1,200/a 5 or six years ago, better than doubled his money sold for $290,000. No timber on it bigger than my arm, trees pushed back on the one field as far as they could go, some of the roughest ground in the county.

Dave