Posted by JDseller on February 04, 2012 at 21:40:20 from (208.126.196.144):
In Reply to: Land prices? posted by WJD on February 04, 2012 at 17:58:33:
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.
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