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Reality of Land Buying 2000 vs Today

daniel93077

daniel93077

Active Member
I ran some numbers today just to get an idea of what the reality of land buying is today vs 2000 for a high income earner. I rounded in some areas just to keep the number clean for below but I don't think it's enough to change the reality. Happy to have someone challenge something they think might be way off and make a large difference in the outcome. I also looked at what the reality was on the income the ground could produce. Very sobering picture. Also, if you bought in 2000 you had 20+ years of falling rates that really put a lot of wind in the sails of landowners.


Month/Year
December 2000
December 2023

Monthly Net Income (CPI Calculator)
2000: $14,200
2023: $25,000

% of Income available for land purchase
2000: 20%
2023: 20%

$ Available for Land Payment
2000: $2,840
2023: $5,000

Land Price Per Acre
2000: $800
2023: $6,300

Interest Rate
2000: 9%
2023: 8%

Loan Amount (15 Years)
2000: $280,000
2023: $530,000

Down Payment
2000: $95,000
2023: $175,000

Total Land Purchase
2000: $375,000
2023: $705,000

Acres That Can be Purchased
2000: 469
2023: 112

Income Per Acre
2000: $80
2023: $210

Total Income
2000: $37,500
2023: $23,500


Anyone see something glaring I'm failing to consider?
 
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Nope looks about right! Now days your buying a lot more for personal enjoyment vs the investment aspect of it ! Land is like stocks . Get in early and potential for big gains are there buy when prices are higher and yes you can see gains but percentages are much lower . My 2 cents!

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Considering that I might be comparing todays situation to a goldilocks period of undervalued land (no doubt it was) that we might never see again. I decided to compare it to a known historically difficult time to buy....1981. While edging close to todays situation a high income earner that was able to buy back then could still buy more ground and have more of it covered by income from the ground, than the same person buying today. Also, after they bought they had 40 years of falling rates since rates where so high during those days. Even with those rates going in their favor the 1981 buyer experienced a drawdown in land prices that would have taken 20 years to recover (from a price per acre standpoint).

Month/Year
December 2000
December 2023
December 1981

Monthly Net Income (CPI Calculator)
2000: $14,200
2023: $25,000
1981: $7,700

% of Income available for land purchase
2000: 20%
2023: 20%
1981: 20%

$ Available for Land Payment
2000: $2,840
2023: $5,000
1981: $1,540

Land Price Per Acre
2000: $800
2023: $6,300
1981: $920

Interest Rate
2000: 9%
2023: 8%
1981: 18%

Loan Amount (15 Years)
2000: $280,000
2023: $530,000
1981: $96,000

Down Payment
2000: $95,000
2023: $175,000
1981: $32,000

Total Land Purchase
2000: $375,000
2023: $705,000
1981: $128,000

Acres That Can be Purchased
2000: 469
2023: 112
1981: 139

Income Per Acre
2000: $80
2023: $210
1981: $60

Total Income
2000: $37,500
2023: $23,500
1981: $8,348
 
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Did you adjust for inflation?

1723133449449.png

IE - If equal to $29,000 today, it would mean land was undervalued in 2000, and higher today. 1981 falls somewhere in between..
 
Yep - I used the bls.gov CPI calculator to compare $25,000 in December 2023 to December 2000, and December 1981. I slightly rounded the dollars for 2000/1981 by $30- $40. 1723133874208.png
 
“Acres That Can be Purchased
2000: 469
2023: 112
1981: 139”
This data set is interesting. 2000 was clearly a very unique & good time to buy. 42 years after 1981 & the amount of acres is not that far off or different.
IMO- Cycles in the land have always existed & will continue. One good article in link below. IMO & “gut” we getting closer towards the recession phase & at least a softening of prices. Could there be a crash? Absolutely possible. Likely? Who knows. We all know 4 things at play right now….
1) sustained high interest rates are putting a big enough piece of the pie in a bad spot right now- any person in any business or farming, etc that has debt.
2) commodities are almost half of what they were 2-3 years ago.
3) market is down, risk of recession high.
4) this election absolutely will have huge impacts on things. IMHO- Trump wins, still maybe a recession but milder & we do recover. Land might rally. If Kackles wins…. IMO- we are screwed. Deep recession.
The only thing keeping things high right now are: cash in folks pockets & small inventory …. Those 2 things can change incredibly quickly with an economic event.

Understanding the Real Estate Cycle | JPMorgan Chase

Learn more about the four different phases of the commercial real estate cycle and why each is important to analyze when investing.
www.jpmorgan.com www.jpmorgan.com
 
Return on Investment (Land Price Only)

1981 to 2000: -0.61% Annualized
1981 to 2023: 4.69% Annualized
2000 to 2023: 9.39% Annualized
 
  • Deleted by Hardwood11
  • Reason: DD
Show…
It is very rapidly becoming a wealthy man's game. My only question is where is 2023 can you buy land for 6300? Not any tillable Tract around here.
The gravel and sand brings 9,000+ and the good stuff can bring 15-20k.
 
Trapshooter1 said:
It is very rapidly becoming a wealthy man's game. My only question is where is 2023 can you buy land for 6300? Not any tillable Tract around here.
The gravel and sand brings 9,000+ and the good stuff can bring 15-20k.
Click to expand...

WAYNE COUNTY, IA LAND AUCTION - EWING - Sullivan Auctioneers - Sullivan Auctioneers

WAYNE COUNTY, IA LAND AUCTION - EWING - Sullivan Auctioneers - Sullivan Auctioneers
sullivanauctioneers.com sullivanauctioneers.com

$7250. 90% tillable. Not my style farm but it's tillable.
 
Junk farmland in parts of IL can fetch upwards of 10 to way over 10, even 15. Makes class A land in other parts of the state that sells for 15 seem like a kmart blue light special.
 
Trapshooter1 said:
It is very rapidly becoming a wealthy man's game. My only question is where is 2023 can you buy land for 6300? Not any tillable Tract around here.
The gravel and sand brings 9,000+ and the good stuff can bring 15-20k.
Click to expand...
Iowa State University Historical Average Country Farmland Values listed Decatur County Farmland as $6,286 per acre in 2023.
 
northcedar said:
Land has been very hard to buy nearly always. Almost never has it cash flowed at the time of purchase. Most land purchases mean someone is sticking their neck out. Get sick of hearing "oh only if I had bought when land was cheap." Wait til land gets cheap and see how much you want to buy.
Click to expand...
I think that’s why 2000 was so unique and why a lot of large recreational landowner’s today started out in that 1996 - early 2000s time frame. It was a golden age for it and they were very insightful to recognize how undervalued that land was and blessed to have the discretionary income that allowed taking that risk. Granted, if they took out a big loan they stuck out their neck but not in the same way as 1981 or today. There were times back then that the timber value alone on some of those properties could have covered what was paid. Also, in the scenario I ran above from historical data the tillable could cash flow the mortgage.
 
If you look over the last 40 yrs how many " corrections" have actually happend ? You can wait your life away waiting for a bargin on land!!! I have several friends who are " still waiting " to buy land !!!! A couple have given up the dream !

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northcedar said:
Land has been very hard to buy nearly always. Almost never has it cash flowed at the time of purchase. Most land purchases mean someone is sticking their neck out. Get sick of hearing "oh only if I had bought when land was cheap." Wait til land gets cheap and see how much you want to buy.
Click to expand...
I say this to people ALL THE TIME!!!!! When it was $______ …. Any price u can point to in past- “too expensive”. “I dont dare pull the trigger”. “Not enough ROI”. Folks said EXACTLY the same thing 24 years ago when prices were possibly the most attractive. & back then- I remember some land being around a grand & no one would farm it so had no cash flow. Exact scenario of my first farm- no one would rent it “corn is $1.50. I’ll plant it if I can farm it for free” was the best I could do on 80 acres with 35 acres of mediocre tillable. It was wild when 3-4 years later someone offered me $70/acre to rent it!
I agree we are trending towards “pay to play”. 10000% agree. At the same time on the other side of that coin…. As a landowner … I’ve got a pile of farms I let others hunt. I CANNOT get folks to help on farms & put in meaningful work. Maybe a day here or there. Most farms folks own, letting others hunt would result in this much help on the farm… ZERO. I would be way better off leasing it out to hunters but I just won’t do that. No one wants to work & put in time. This isn’t just me talking- this is most farmers & landowners I know. When fall comes around - people miraculously have tons of free time!!!!! ;). Winter, spring & summer- crickets. So….. for those who actually would help a landowner out. Maybe it’s building fence & gates. Or spraying noxious weeds. Or whatever skill u have (mechanical, carpentry, electrical, whatever)…. Anyone who would just show up and put in substantial help could get places to hunt. Maybe 1% of folks do it. & I understand- it’s easier to just: knock on the door, stroke a lease check or jump around as u have to keep options open …. I get it. But folks who can use their skills, time or work to help LO’s…. Way more opportunity than anyone can imagine. Always a way to do it.
 
Sligh1 said:
I say this to people ALL THE TIME!!!!! When it was $______ …. Any price u can point to in past- “too expensive”. “I dont dare pull the trigger”. “Not enough ROI”. Folks said EXACTLY the same thing 24 years ago when prices were possibly the most attractive. & back then- I remember some land being around a grand & no one would farm it so had no cash flow. Exact scenario of my first farm- no one would rent it “corn is $1.50. I’ll plant it if I can farm it for free” was the best I could do on 80 acres with 35 acres of mediocre tillable. It was wild when 3-4 years later someone offered me $70/acre to rent it!
I agree we are trending towards “pay to play”. 10000% agree. At the same time on the other side of that coin…. As a landowner … I’ve got a pile of farms I let others hunt. I CANNOT get folks to help on farms & put in meaningful work. Maybe a day here or there. Most farms folks own, letting others hunt would result in this much help on the farm… ZERO. I would be way better off leasing it out to hunters but I just won’t do that. No one wants to work & put in time. This isn’t just me talking- this is most farmers & landowners I know. When fall comes around - people miraculously have tons of free time!!!!! ;). Winter, spring & summer- crickets. So….. for those who actually would help a landowner out. Maybe it’s building fence & gates. Or spraying noxious weeds. Or whatever skill u have (mechanical, carpentry, electrical, whatever)…. Anyone who would just show up and put in substantial help could get places to hunt. Maybe 1% of folks do it. & I understand- it’s easier to just: knock on the door, stroke a lease check or jump around as u have to keep options open …. I get it. But folks who can use their skills, time or work to help LO’s…. Way more opportunity than anyone can imagine. Always a way to do it.
Click to expand...


It's crazy to think of a day when someone wouldn't pay rent for tillable and just a few years later it's up to $70 per acre. Wild times!

It can be such a big purchase for most that I can imagine some may never feel great about pulling the trigger with the way things pencil out at any single point in time. If someone is going to wait around for 2000 valuations they probably won't see it in this lifetime.

I like to look at historical ROI because I think it paints a clear picture that some years are undeniably better than others for buying ground. It quantifies what you posted about market cycles.

It was an interesting exercise to see what the same inflation-adjusted high-income earner could buy at given points in time.

Here's another interesting one I just ran using Claude AI. I decided to take loans/interest rates out of it and just look at a cash buyer. I ran Iowa State's data set going back to 1950 for Decatur County farmland. Here's the purchasing power of $720K inflation-adjusted from 2023 back 1950. We can definitely see the market cycles. An inflation adjusted $720K has never before bought so few acres. The historical mean $720K inflation-adjusted dollars could buy is 425 acres and the median is 491. It's currently as low as it has ever been.

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Try out Artifacts created by Claude users
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Of course there are many factors that would suggest this should happen to some degree over time but historical numbers would suggest that we'll likely see an increase in that inflation-adjusted purchasing power at some point. The key factors that will probably never make it like the "good old days"

- They aren't making more of it.
- Market is more efficient
- Likely an ever-increasing number of people competing for it
- Farmland is more productive today (but if you are just going to put it up for cash rent it seems you are worse off than in past years...anecdotally at least)
- So many other variables we don't even know to consider

Income on a % basis seems to matter less than I'd anticipate when it comes to what people will pay for farmground.

If anyone is interested here is the Rolling 10, 20, 30 Year annualized return (land prices only) going back to 1950:

10 Year: https://claude.site/artifacts/6e046f3b-3df9-4731-ac20-e7a9c3bfcf86 (Mean 6.73% & Median 6.32%).... not too shabby!

20 Year: https://claude.site/artifacts/07200961-a625-4b90-b964-87226f4ae30e (Mean 6.14% & Median 7.40%)

30 Year: https://claude.site/artifacts/bd2ecabe-e024-4ef6-860e-625cc073dde0 (Mean 5.51% & Median 5.01%)

Here is the best and worst years for each rolling period (Annualized): https://claude.site/artifacts/c191b21c-31b7-45c6-a692-428329433c54
 
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