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Land values and the economy

Thinkin Rut

Thinkin Rut

PMA Member
Any thoughts what the current economic problems will do to land values? I've been seeing more "reduced price" hanging on ads. I would guess at least some downside effect especially if corn prices deteriorate. I'd think with oil and gas coming down, that would be a negative for ethanol? I guess the silver lining is less urban sprawl.
 
IMO, Hunting Land will go down and already has.

Farm ground, IMO will go up for next 3 years- for sure until the end of that when some ethonal subsidies end. I don't know as much on farm ground. My knowledge is more in hunting land.

To most- hunting land is not a NECESSITY. Alot of wealthier guys will always be able to buy BUT in hard times the Middle Class will have to tighten up and/or put that purchase off for a few years. Tough times will for surely reduce prices. Just my opinion. I've already seen the lower prices and I LOVE IT!!!! Better deals!! Now's the time to buy! Why would you buy when prices are super high, wouldn't someone "Prefer" to buy when prices go down (if you can). Yep, you're right though!

*One other thing to keep in mind is: 75-80% of ALL iowa land is paid for- DEBT FREE. Much of the land bought is paid for with cash. So, that will insulate to some degree. Not as drastic drops as housing with people borrowing 100% of value.
 
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">*One other thing to keep in mind is: 75-80% of ALL iowa land is paid for- DEBT FREE. Much of the land bought is paid for with cash.</div></div>

Is that true Sligh? I'd have never guessed it that high! Any explanations?
 
The price of corn today in sw Iowa was $3.91. Two days ago no bids were given ! Input prices are nuts and won't come down . I actually feel sorry for the guys that locked in the big cash rental rates. Kind of sounds like the mid 1970s all over again. Most of the land speculators are running on the banks cash. I can see land prices dropping alot from here on for the next year or so. Sure they won't be down in the $300s for timber again. I really think $850s to $1000 is in reach sometime soon. Kind of funny the gas prices go down when the economy goes to he!!. Just makes ya think what the goverment said to big oil?
 
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Kind of funny the gas prices go down when the economy goes to he!!. Just makes ya think what the goverment said to big oil? </div></div>

I was thinking the same thing....
 
Any rough ideas on 2009 cash rent prices for land in SC Iowa?
110 Acres
Typical Corn yield: 150 B/A
Typical Bean yield: 50 B/A

Thanks.
 
Grasshopper, I think the guy's name is Troy Louwagie or something who headed up the Realtor's study on how much debt is on ground. That's where I read it LAST about a month ago. Now, I've read and heard this at least half a dozen times before. I know this is within a few %'s of FACT. Whatever that real estate commission is in Iowa (you could find it)- they did the latest study coming up with that figure.

CASH RENT, sounds like pretty good ground, many other guys who farm will give you far better ideas BUT- if it were all in ONE FIELD and you could get in and out easy AND the deer didn't trash it- I'd say right around the $170 mark. That'd be my GUESS. Now, to get far more solid #'s than my silly guess, I'd go to the FSA office or website and get their cash rent averages for the year. All they will be able to give you is 2008's #'s. It's sweet because it gives you low, medium and high grade values based on your region and what the average rental price per acre is. Show that to your tenant and it's a great 3rd party figure of how much rent should be. Now, remember- if your fields are choppy and in seperate parts of the farm AND they are covered with deer- rent will go down a bit.

I don't think we'll see $850-1000 acre timber (IMO) unless we have a major recession bordering on a depression. That's just a gamble whether that will happen or not. My opinion it will not go that low (I hope it does so I could buy more but doubtful!).
 
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Single Coyote</div><div class="ubbcode-body">Any rough ideas on 2009 cash rent prices for land in SC Iowa?
110 Acres
Typical Corn yield: 150 B/A
Typical Bean yield: 50 B/A

Thanks. </div></div>

Single Coyote, that will rent for 185-190 an acre. Right now if you don't want to pay it, someone will. That is what is keeping cash rent up higher than land lords.
 
I spoke with Rich Baugh yesterday, he owns Iowawhitetail properties. Most of his listings still range from $2500-$3500 per acre, depending on timber, CRP, deer density etc. He mentioned that he is seeing the number of potential buyers drop. With that being said, I can only imagine that the land prices for hunting ground will go down. How much? I couldn't guess.

Joe
 
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Hobart</div><div class="ubbcode-body"> He mentioned that he is seeing the number of potential buyers drop. With that being said, I can only imagine that the land prices for hunting ground will go down. How much? I couldn't guess.

Joe </div></div>

Simple supply and demand.
 
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Sligh1</div><div class="ubbcode-body">IMO, Hunting Land will go down and already has.

Farm ground, IMO will go up for next 3 years- for sure until the end of that when some ethonal subsidies end. I don't know as much on farm ground. My knowledge is more in hunting land.

To most- hunting land is not a NECESSITY. Alot of wealthier guys will always be able to buy BUT in hard times the Middle Class will have to tighten up and/or put that purchase off for a few years. Tough times will for surely reduce prices. Just my opinion. I've already seen the lower prices and I LOVE IT!!!! Better deals!! Now's the time to buy! Why would you buy when prices are super high, wouldn't someone "Prefer" to buy when prices go down (if you can). Yep, you're right though!

*One other thing to keep in mind is: 75-80% of ALL iowa land is paid for- DEBT FREE. Much of the land bought is paid for with cash. So, that will insulate to some degree. Not as drastic drops as housing with people borrowing 100% of value. </div></div>


I'm not sure I agree. Commodity prices are driving farm land so as long as bio fuels keep them up some farm prices will stay up. A good farm within a few miles of me just sold for $7080 per acre. Without buildings it still would have brought $5500 or more. Crop ground will keep rec ground prices strong. They may settle some but there is only so much to go around. IMO there is more wealthy buyers looking than available land. That will keep prices up. God only made so much land. I got my ground 3 years ago for under $2000 per acre. Even mix of timber and crop ground. Very similar stuff near me sold for close to $4000 recently.
 
Come on over to north western Iowa and you'll really see some land going for some $$. The inlaws neighbor sold thier land for $12,000/acre. All plantable with no buildings.
 
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Got Rack</div><div class="ubbcode-body">sold thier land for $12,000/acre.</div></div>

I'm no bean counter, but how can that financially work for the producer??? Is it being developed or zoned differently?
 
We have 80 acres of timber by the ceder for sale for $440,000 I think that's about $5,500 per acre. that's just timber no tillable acres. It border the river. Anyone want to give me $440,000?
 
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: sureshot1</div><div class="ubbcode-body"> <div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Kind of funny the gas prices go down when the economy goes to he!!. Just makes ya think what the goverment said to big oil? </div></div>

I was thinking the same thing.... </div></div>

It has nothing to do with the gov't saying anything to big oil. It's simple supply and demand. The futures market anticipates that the demand for oil will decline with the economy in recession, and therein lies the drop in gas prices. Less production means less transportation and energy demand.

As far as land prices are concerned, I don't think the economy will affect hunting ground values that much in Iowa. In some areas perhaps, but not on any scale. Iowa land is a fixed supply, and the demand is ever growing. There are plenty of wealthy non residents that will look to buy land whenever the political environment is right... which is why everyone should join and support the IBA, since it looks like Culver is now trying to undermine us all by opening the flood gates on NR tags, with all of these top secret committees... /forum/images/%%GRAEMLIN_URL%%/mad.gif
 
Its going to have to go down with the price of grain going down and the price of inputs going up! I think it will go down soon especially if the banks are tightening up lending
 
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Willie</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Got Rack</div><div class="ubbcode-body">sold thier land for $12,000/acre.</div></div>

I'm no bean counter, but how can that financially work for the producer??? Is it being developed or zoned differently? </div></div>

I honestly don't know if it is going to be rezoned, I really doubt it based on it's location but it could change. It is some prime ground, they got on avg 194 bushels/acre of corn this year. Don't know for sure about the beans but I'm sure it's higher than that. Hell another neighbor sold his for $10,000/acre which I thought was high until this came along, and no it wasn't the same buyer.
 
My neighbor's family lives in Remsen...aka NW Iowa and I know for a fact that land has sold in the past month for more than $8k/acre. All the buyers are coming out of California...ADD THAT UP!!!

In Eastern Iowa I know of ground that sold for over $6k/acre in August. SO with this down turn (head back towards reality) I sure hope the prices go down. I know my dad will benefit from a lower assesment in the way of taxes because it's not like he's selling his land anytime soon.

If the highest price per acre in a county has come in the past few months from a Non-resident buyer, then I'm all for the market going to $hit...let them lose their a$$ so they don't come back to buy up the land, which only gives them a foot in the door to bitch about the hunting regs.
 
I can't imagine what would drive that kind of negative investment, because if you do any kind of cash flow chart it is ridiculous. Here goes another of my anilazations.

100 acres at $12,000.00 per acre = $1,200,000.00
financed at 7% for 20 years annual payment =$113,271.51

average annual yield @194 bushel per acre =19,400 bu
current price per bu @ $4.00 annual income = $77,600.00
projected input cost per acre $550.00 =$55,000.00
_____________
Non land net revenue annually = $ 22,600.00

Annual land cost payments = -$113,271.51
______________
Annual negative income = (-$90,671.51)

This doesn't allow any thing for property taxes or any real equipment costs or insurance costs.

Now lets look at taking that same $1,200,000.00 at 6% for 20 years. Total interest earned would be $2,838,830.93 for a future value of that money of $4,038,830.93. Which looks like the better over all investment for 20 years? Even if we were to assume that the land value would increase by $1,000.00 per acre and you sold it for $13,000.00 you would would still only sell for $1,300,000.00 for a profit of $100,000.00. If you factor the crop yield profit at a constant $22,000.00 per year for 20 years you would add another $440,000.00 for a total profit of $540,000.00 as opposed to the $2,838,830.93 the other way. Even if a person had cash to pay for the farm it would not cash flow because of the future value of the money. What are people thinking?
 
But how much of that money do the land owner/farmers get back in welfare, excuse me, subsidies at the end of the year?

I know around my sister and bro-in-laws house a veterinarian from Kalifornia and a couple investors put a lot of money down on 240 acres in hopes of turning it into a 5000 head dairy operation. Luckily that was shot down by the citizens protest and the DNR.
 
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