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One of these things doesnt belong.....

T

Trapshooter1

Well-Known Member
3.75 cash corn
9.50 cash beans
7-8% interest rates
17,500/acre land auction results........ and it needs 1100/acre worth of work to make the farm good, Tile etc etc etc.

Something is currently broken. I'm not sure what it is, But Im currently convinced land prices do not have a thing to do with commodity markets.
Less than a 2% ROI with over 5% CDs available at the bank.

Just Shaking my head.
 
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Apparently a lot of people with cash to spend. IMO some family farms are loaded. Farming land that much of is long paid for, they've got cash to buy and know that individual piece wont be much of a return right away, but long term it will be.
 
sep0667 said:
Apparently a lot of people with cash to spend. IMO some family farms are loaded. Farming land that much of is long paid for, they've got cash to buy and know that individual piece wont be much of a return right away, but long term it will be.
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Agreed.
Farms that have been in a family a long time don't have the overhead and willing to overpay for certain farms in proximity to their current operation and know in the long run the farm will be worth more than what they paid.
I have sold rec farms in similar way. Neighbor that has a big farm and doesn't want a smallish neighbor next to them, way over payed me so I would sell. Looking back 8 years later and it was a bargain in todays market and he has one less neighbor.
 
I had an investor call me once and he said I have 5 million in the bank getting 4%… if you can find me farm land that gets 3% I’d rather have that .

So he bought a couple parcels, and is still buying here & there . It’s hard to even pencil out 3% now! It really doesn’t add up in most counties, you have to be creative to find anything that makes sense ?
 
Hardwood11 said:
I had an investor call me once and he said I have 5 million in the bank getting 4%… if you can find me farm land that gets 3% I’d rather have that .

So he bought a couple parcels, and is still buying here & there . It’s hard to even pencil out 3% now! It really doesn’t add up in most counties, you have to be creative to find anything that makes sense ?
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Seems like 2.5% roi or less is the norm these days on ground... I have seen some realtors claim 3 even 3.5% return but that's with suspicious numbers...
 
The last time land prices got ultra high for the times, guys were buying land for 2800-3500, in the mid 80s. Then land values fell by 2/3s. It took 20 years for land to recover back to those levels. I'm not saying the 80s will reoccur but Land now is in the 15-20,000 plus range. And to me it feels top heavy with 7-8 interest.

Will the market run out of buyers? Has the FED and the government backed us into a corner of inevitable inflation? Time will Tell. Interesting times ahead.
 
My memory of the 80’s was that banks lent money with little to no cash down, then grain prices tanked. Most financial institutions are asking 30% down now. Correct me if I’m wrong on this.

But buyers that don’t need financing are changing the game, IMO.


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I run into buyers (investors/farmers) who are not diversified and lose zero sleep over it . They don’t buy stocks or bonds.

They are comfortable with farm land and maybe have cash in the bank/CDs, etc…

That’s what they know and they make it work. I actually don’t blame them one bit .
 
Current interest rates don't matter if you're sitting on several million in the bank, and apparently a lot of farmers are still pretty flush with cash from corn prices a couple years ago.

Corn prices right now are bad, sure, but those fluctuate. Legacy high quality farmland doesn't come available for sale in the neighborhood every day and if you don't buy when it does (at whatever price necessary), it may not come available again in your lifetime. Seems a fairly easy calculation if you're a farmer with a lot of cash in the bank.
 
Give it one more year like this….
When grain went in half around 2015… those crazy ground & rent prices stayed for about 1-2 years. 2-4 years later…. Oh man, folks tunes changed. Ground slowed way down. Prices in my region came down a good bit. Rents tanked. FCS was calling farmers LOC left & right by about 2016-2017. It was NOT a great scenario.
Wealthy dudes then- just fine - just like they will be this time. But it for sure slowed them down & stopped a lot of em from aggressively buying. All this happened with 4-5% interest rates Now we are running 7-9%. IF things stay the same as they are NOW- it’s gonna slow. 1-2 years from now as farmers renting high cash rent rates are gonna be in big trouble - AGAIN.
 
You're going to need the total economic package to go against farms before you see a meaningful drop in land prices. A prolonged recession with high unemployment would do it. There is just too much outside money feeding a lifestyle people crave.
 
IowaBowHunter1983 said:
How? Home mortgage rates are around 6.5. Farm loans are always higher.
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That's what it was is all I know. I went into it expecting 6.1 but it dropped by the closing date. The only thing I do is keep the borrowing percentage low enough to get their best rate but I was not given any option that wasn't in the sixes.
 
hillrunner said:
That's what it was is all I know. I went into it expecting 6.1 but it dropped by the closing date. The only thing I do is keep the borrowing percentage low enough to get their best rate but I was not given any option that wasn't in the sixes.
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Just curious, what was your down payment to loan ratio? No problem if you don't want to answer, I'm just curious if that might have had something to do with it, an abnormally high down payment amount....5.6% does seem crazy low without some extenuating circumstances, at current interest rates. Was it a long-term fixed, short-term ARM, or something else?
 
jflournoy said:
Just curious, what was your down payment to loan ratio? No problem if you don't want to answer, I'm just curious if that might have had something to do with it, an abnormally high down payment amount....5.6% does seem crazy low without some extenuating circumstances, at current interest rates. Was it a long-term fixed, short-term ARM, or something else?
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Pm sent
 
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