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Land prices / insane!!!

Wi transplant

Wi transplant

PMA Member
Whats everyone's feelings on if when land price spike will flatten off? Go back down some? . I bought my farm in se iowa 4 years ago this coming feb. For 2500 acre . The 82 acres touching my east fence line just was on an auction that ended today ! It has approx 40 acres of timber with creek and 28 acres tillable and 10 acres of grass pasture. And 2 small ponds . Just sold for 5100 an acre!!!!! I guess someone from northern iowa bought it for hunting! I never would of guessed it would have gone over 4k ! Wow!!!

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In my humble opinion, interest rates will dictate what happens and when. Asset inflation, of various kinds, has been fueled by incredibly low finance costs, in the US and worldwide. I fear the day when rates hit 5% (which over a long historical period is still low) and what that might do to tillable, rec land, residential housing, stocks and on and on. A little scary to think about actually. But then again, Japan has had artificially low rates for decades...........maybe the fed can just keep pumping juice into the system forever.

I bought my timber farm in late 2016 and did not expect values to have increased to the current levels this quickly. Unfortunately I enjoy the place too much to sell it.

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Great question/topic. I’m really wanting to add a couple of more parcels in the 40-70 acre range near my home farm and I’ve been asking myself and others this very same question. Can’t help but feel like if I bought something right now that I’d be “buying high” and that a correction has to come here before long. But then again who knows. As BJohnson stated, money is so cheap right now and unless that changes I think the prices will continue to rise. West central IL rec ground is anywhere from 4500-5500/acre right now it seems like with good tillable being way more than that.
 
Questions one might ask themself: If the tract borders/adds to a currently owned parcel, when will it come back up for sale again? How long does one plan to hold it? If a person doesn't get really crazy on price, land tends to appreciate in value over the long term. I'd make the bet that $2,500/acre ground is gone and won't be coming back.
 
I bought a flat bottom ground farm in the 3000/ac range in Missouri. Half crop, half oak timber …. early 2021.

A similar farm (with 24 more crop) …2 miles away sold on auction for 8000/ac
Last week.
 
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55 acres of flat crop ground be me brought 21,500 an acre a couple weeks ago. A 40 acre rec type piece brought 8000 an acre, a couple of doctors bought it to build on.


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crietveld said:
55 acres of flat crop ground be me brought 21,500 an acre a couple weeks ago. A 40 acre rec type piece brought 8000 an acre, a couple of doctors bought it to build on.


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You obviously live by Pella. My parents farm is just across the dirt road from the 40 . And I’m pretty sure it was 9k an acre, they offered it to us for 10k an acre before it hit the market.
 
I think it’s just going to continue to steadily go up. Rec ground is incredibly popular right now and demand is high. And there’s only so much in the state of Iowa. Interest rates are cheap. I agree with BJohnson that it will continue to go up in price until interest rates go up. Just a couple years ago most rec ground was under 4K an acre. Now it is starting to become rare to see rec ground for under 5K an acre. There’s only so much land and I think the fact that getting permission to hunt private is almost gone has a lot of people not only leasing but now buying. It is pretty clear that if you do not have land yourself or lease ground you won’t be able to hunt private ground much longer.


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IMHO - We are on the left side of a bell curve….. if I had to guess, we are 3 months away from peak. After peak- I don’t know when drop will happen or to what extent. I hope it’s a gradual down turn. Gradual reduction if bell curve is not a hard drop & Hoping that’s what happens.

IF IF IF the bell curve continues up, for say another year with no correction….. IMO- at that time, we are set up for a crash. IF that happens. Let’s say tillable gets to $15-30k for example when it was $7-15k previously. & mixed hunting tracts reach $5-10k ….
That’s setting up for a crash IMO. All it will take on that “house of cards” is a 1% increase in interest rates or corn to drop by $1 a bushel. If we see increased rates or drop in grain prices or BOTH!!!….. things will get hit hard…..
Huge input costs on grain - everything from cash rent to herbicides to fertilizer…. That is risky right there cause second corn/beans go down 20% - trouble. Add interest rates going up 1% - oh man. We are “one impactful event” away from correction. 2+ things happen (China stops buying grain or world economic troubles, etc etc) - there’s a % of folks who will go belly up.
Correction will come. This is a cycle. When & how deep - no one knows. For the health of the market & to avoid a potential disaster - the faster a slow down comes the better IMO.


“BE CAUTIOUS WHEN OTHERS ARE GREEDY! BE GREEDY WHEN OTHERS ARE CAUTIOUS!”
 
Sligh1 said:
IMHO - We are on the left side of a bell curve….. if I had to guess, we are 3 months away from peak. After peak- I don’t know when drop will happen or to what extent. I hope it’s a gradual down turn. Gradual reduction if bell curve is not a hard drop & Hoping that’s what happens.

IF IF IF the bell curve continues up, for say another year with no correction….. IMO- at that time, we are set up for a crash. IF that happens. Let’s say tillable gets to $15-30k for example when it was $7-15k previously. & mixed hunting tracts reach $5-10k ….
That’s setting up for a crash IMO. All it will take on that “house of cards” is a 1% increase in interest rates or corn to drop by $1 a bushel. If we see increased rates or drop in grain prices or BOTH!!!….. things will get hit hard…..
Huge input costs on grain - everything from cash rent to herbicides to fertilizer…. That is risky right there cause second corn/beans go down 20% - trouble. Add interest rates going up 1% - oh man. We are “one impactful event” away from correction. 2+ things happen (China stops buying grain or world economic troubles, etc etc) - there’s a % of folks who will go belly up.
Correction will come. This is a cycle. When & how deep - no one knows. For the health of the market & to avoid a potential disaster - the faster a slow down comes the better IMO.


“BE CAUTIOUS WHEN OTHERS ARE GREEDY! BE GREEDY WHEN OTHERS ARE CAUTIOUS!”
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I’d say a correction is coming shortly too unless this is all getting bought with cash.


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letemgrow said:
I’d say a correction is coming shortly too unless this is all getting bought with cash.


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BINGO!!!!!!
That’s the KEY!!!! It NEVER is all cash. EVER!!!!!!! There’s a “portion” that’s a lot of debt. That % will always get killed when correction comes.
They create the correction….. they (“they” as in farmers, land buyers, investors, folks who need to cashflow to any degree) cannot take a “20% reduction” in revenue. Or tolerate a 1-2 year loss in farming. Or a loss to their business or a loss of a job/pay decrease. It only takes “5%” of owners or operators to have problems to ripple through market. By definition- a 1% increase in interest (even .5%) or 20% reduction in grain & 20% increase in inputs…. It will sink a portion of people. Correction that could be as bad as a crash when it occurs.
Then folks like us need to ask ourselves “is that possible or is one event likely to happen?” IMO - the answer is “yes, something like that will happen - just a matter of WHEN?”
 
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