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One of these things doesnt belong.....

hillrunner said:
Are people really paying 7-8% interest? I closed on a property this morning at 5.6%.
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Not all that bad compared to the min-80's. Interest rates were 14.5% when I bought 7 acres and built our house. About a year later it dropped to 12.5 % so I refinanced to cut down on monthly payments, then a couple years later it dopped to 7.5% and I knocked the 30y mortgage down to 15 years. It stayed at 7.5 until I paid it off. I could have bought my Grandfathers farm (114 acres) for 180k, but those interest rates blew my dream!
 
Sligh1 said:
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.
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Not many went broke. LOTS of working capital and equity in farmers hands. Charts show VERY little drop in land prices if even noticeable during that time. If rates continue up from inflation the LOC interest will start to hurt.
 
Muskrat24 said:
Not many went broke. LOTS of working capital and equity in farmers hands. Charts show VERY little drop in land prices if even noticeable during that time. If rates continue up from inflation the LOC interest will start to hurt.
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SC iowa - a lot did. Guys renting considerable ground- i know dozens that closed it up. FCS called a LOT of LOC’s & wouldn’t renew a gazillion across the state back then. North 2/3rd of state - very few hung it up or forced out. So- regional, IMO.
There’s a pretty large amount of operators trying to grow & locked in to rents $400-500/acre. Northern 2/3rd of state. A portion of those will be in trouble IMO. Worst case still isn’t “awful” but I’ll bet a lot of guys walk away from rent contracts. Did it in 2016-2017 & many said “sorry but- bye! Sue me if u want”. Folks owning land & renting it out- they gonna be hit with some rent corrections here & a few of em will be stressed “I can’t find a renter”.
All above means- market will soften. Which, IMO - is a good thing. Things got out of control for too long. We need a correction & it’s here/coming. U will start to see more “no sales”, “price reduced” & farms sit much longer. Give it a year- if things stay the same or get worse…. All that will escalate far more. We could see a scenario where rates drop, economy booms (say Trump wins) & land rallies again. We could see things go in to recession too though- who knows. I don’t. But- things are absolutely softening & slowly correcting IMO.
 
Sligh1 said:
SC iowa - a lot did. Guys renting considerable ground- i know dozens that closed it up. FCS called a LOT of LOC’s & wouldn’t renew a gazillion across the state back then. North 2/3rd of state - very few hung it up or forced out. So- regional, IMO.
There’s a pretty large amount of operators trying to grow & locked in to rents $400-500/acre. Northern 2/3rd of state. A portion of those will be in trouble IMO. Worst case still isn’t “awful” but I’ll bet a lot of guys walk away from rent contracts. Did it in 2016-2017 & many said “sorry but- bye! Sue me if u want”. Folks owning land & renting it out- they gonna be hit with some rent corrections here & a few of em will be stressed “I can’t find a renter”.
All above means- market will soften. Which, IMO - is a good thing. Things got out of control for too long. We need a correction & it’s here/coming. U will start to see more “no sales”, “price reduced” & farms sit much longer. Give it a year- if things stay the same or get worse…. All that will escalate far more. We could see a scenario where rates drop, economy booms (say Trump wins) & land rallies again. We could see things go in to recession too though- who knows. I don’t. But- things are absolutely softening & slowly correcting IMO.
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This inflation deal doesn’t get better with lower rates, IMO. The numbers don’t make sense but we gonna have to see 2-3 years of low prices to see much slip in land prices. And probably no sales at that. Unfortunately this hurts the smaller producers and beginning farmers the worst.
 
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Muskrat24 said:
This inflation deal doesn’t get better with lower rates, IMO. The numbers don’t make sense but we gonna have to see 2-3 years of low prices to see much slip in land prices. And probably no sales at that.
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Agree 100%. It “appears” inflation is slowing way down. My wild guess…. Inflation gets lower as we tilt towards recession & economy gets a bit rocky. This exact same scenario (almost) was here in 2015. Took til about 2017 for prices to go down & dag nab- they sure did!!!!

Even up by our NW iowa farms (my wife’s side is from up there and owns/farms a lot of acres…. Has for probably 75+ years)…, I remember things in 2015 going for like $12-15k & by 2017-2018 u could buy stuff for like & $9-11 in that same area. Not the absolute best area up there but plenty of $ & it slowed a lot. Wifes fam got lots of farms & folks offered $500 to rent it all about 2 years ago. didn’t do it as they farm all their own stuff & don’t rent any from others but folks always ask. I recently asked em “what u think u could get NOW?” Said “hmmmm, $350 would be my guess??” That’s a pretty big swing. They are big rent figures in either case but that’s a big shift in a short period of time. Low commodities RIPPLE, sometimes slowly, through the whole market. Even gazillionaires - due to the psychology of it- pull back when things dip down like this.

THE BIG POINT I’D MAKE FOR GUYS ON HERE….. IMHO- there’s gonna be better deals, motivated sellers & the next 1-12 months…. Think folks should be ready & willing to pull trigger. If folks stop buying - thats precisely when I’d want to buy.
 
I thought things would slow down here and maybe have some no sales and rent would stabilize, and maybe dip. But from the land sales I've seen the last 6 weeks and rent I'm seeing. It hadn't happened yet. It's going to be awhile.
 
Sligh1 said:
THE BIG POINT I’D MAKE FOR GUYS ON HERE….. IMHO- there’s gonna be better deals, motivated sellers & the next 1-12 months…. Think folks should be ready & willing to pull trigger. If folks stop buying - thats precisely when I’d want to buy.
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I can't deny this thought nor did I deny this way of thinking 4 or 5 years ago when many of us thought the same thing, land would buckle with everything that was ahead of it. The reality of it is, if we were buying back then, we would be whistling today. Now we are still waiting for that correction to send land prices down to a price that will be higher than it was when we originally thought it would correct 4 or 5 years ago. The larger point to be made here is it is very difficult to time any market.
 
Anyone thinking stuff like “I’ll wait til land drops back to what it was in 2010 or in half” or something crazy like that will almost certainly will be wrong. To say it won’t soften or slow way down would also be incorrect IMO. It’s already softening. It’s already down from say 6-12 months ago. 2 years ago folks were frantic to buy. Not so today. 1-18 months it LIKELY will swing to buyers market or more so. It’s kinda here now or trending that way. I’ll make one tiny prediction (& yes, for 99% - I wouldn’t try to time market - just buy a good farm at fair price) …. Land report will be out in next month. I’ll lay a nickel on it prices are DOWN. 1-2% minimum. & that’s in just SIX MONTHS & follows about a 3% drop the 6 months prior. That sounds minor & it probably is. But it’s one more reflection on the trend. Second Land report by next spring… bet a dime it’ll be down another 2-5% UNLESS there’s some unexpected event that makes it boom or drop drastically. Five or six (6-month) reports dropping land at 2-3% each time is not insignificant.

The best way around all this is fairly simple IMHO for guys on here…. Buy when u can afford it and u “buy a good chunk at a good price”…. Say u find a “deal” that’s 10% under market value. Then- u get to work & fix a whole lotta things…. Make it increase in value by another 10% because of your work…. That’s 20% right there. Most folks shouldn’t really care too much about what the actual value of their land is but for those on the sidelines- u can’t ignore a path like that IMO.

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This is the link straight to the report from last spring. & keep in mind- SPRING 2024…. This was just the START of commodity prices coming down.

 
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