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Reality of Land Buying 2000 vs Today

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Link above is really interesting and I think it tells a compelling story (you have to slide sideways to see all the data). I took historical mortgage rates (all I could find that went back that far) and added a little bit to them so they were closer to what land rates might look like (I'm sure it's not exact but end result of this scenario would be the same). I assumed $720K land purchase (2023 dollars), 15 Year Mortgage, 25% down. Ran it all the way back to 1950. I had it plug in top 5% Household Income Data and then asked it to add a "Payment Affordability Index" based on a percentage of income required to make the mortgage payment. What we find is that an inflation adjusted $720K land purchase has never (at least back to 1950) been more affordable to the top 5% of income households than it was in the low-interest rate years of 2020 & 2021.

We also see that right now, a 720K mortgage is as affordable as it's ever been for a top 5% household. Basically, the top 5% households are earning about as much as they ever have on a relative basis (to mortgage costs). It's the story Skip and few others have said. "There's a lot of money out there". All that money has driven up demand and thus purchasing power is down.

Mean & Median affordability for top 5% households was 28% & 28.3%

I also asked the AI to provide me an analysis of the data based on a balance of both affordability and purchasing power. It stated the obvious, it's amongst the worst of times from that perspective due to the diminished purchasing power.
 
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daniel93077 said:
claude.site

Claude Artifact

Try out Artifacts created by Claude users
claude.site

Link above is really interesting and I think it tells a compelling story (you have to slide sideways to see all the data). I took historical mortgage rates (all I could find that went back that far) and added a little bit to them so they were closer to what land rates might look like (I'm sure it's not exact but end result of this scenario would be the same). I assumed $720K land purchase (2023 dollars), 15 Year Mortgage, 25% down. Ran it all the way back to 1950. I had it plug in top 5% Household Income Data and then asked it to add a "Payment Affordability Index" based on a percentage of income required to make the mortgage payment. What we find is that an inflation adjusted $720K land purchase has never (at least back to 1950) been more affordable to the top 5% of income households than it was in the low-interest rate years of 2020 & 2021.

We also see that right now, a 720K mortgage is as affordable as it's ever been for a top 5% household. Basically, the top 5% households are earning about as much as they ever have on a relative basis (to mortgage costs). It's the story Skip and few others have said. "There's a lot of money out there". All that money has driven up demand and thus purchasing power is down.

Mean & Median affordability for top 5% households was 28% & 28.3%

I also asked the AI to provide me an analysis of the data based on a balance of both affordability and purchasing power. It stated the obvious, it's amongst the worst of times from that perspective due to the diminished purchasing power.
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Is this an “eat the rich” argument? I didn’t follow the link,


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When I did click on the link
b58079cf87c901be6576440a593562f7.jpg

That instills confidence.


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Yeah... it's their disclosures in case AI produces something that hurts someone's feelings due to the prompts of the user.
 
JNRBRONC said:
Is this an “eat the rich” argument? I didn’t follow the link,


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No eat the rich argument here. It's just an analysis of the data.

I think it does appear the rich have gotten richer but Americans in general have gotten richer over the years. There's been a lot of upward mobility.

As it relates to making a land purchase looks like the top 5% earner is cash rich/acreage poor compared to years past though.
 
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I have the chance to purchase some AG ground connecting to my farm. What is going rate ? Not sure on CSR numbers, just curious average rate per acre these days. Thanks
 
theDoorman said:
I have the chance to purchase some AG ground connecting to my farm. What is going rate ? Not sure on CSR numbers, just curious average rate per acre these days. Thanks
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Depends on area of state iowa? I would say 8k to 20k depending on location and soil quality.
In oskaloosa area last couple sold around 13k acre
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An average farmer back in the late 80's and 90's could buy ground based on if it penciled out that the land could pay for it. Now you better have a lot of extra to pay for it.
Used to be $300-$500 pasture ground with $500 weaning calves.
Now its $6000 pasture ground with $1500 calves(which may drop to $700 at any given time).
 
bluedog69 said:
An average farmer back in the late 80's and 90's could buy ground based on if it penciled out that the land could pay for it. Now you better have a lot of extra to pay for it.
Used to be $300-$500 pasture ground with $500 weaning calves.
Now its $6000 pasture ground with $1500 calves(which may drop to $700 at any given time).
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Not sure what your point is.

Time value of money and inflation come to mind.

We can wax poetic of yesteryear, but we live in the here and now.

I’d buy 5 times the acres we bought in 1991 if the price was the same. Ain’t happening.

Yeah, I’m priced out of the market now, Should have jumped on the retiring neighbors farm but price creep had me nervous then (2000) with a young family. Missed that boat…

I’m not seeing a huge correction that some are hoping for, couple percent tops if that.


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RinggoCy said:
My wife and I are saving for our first farm and ya'll are making me depressed. Stop.

Haha..................
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Buy as soon as you can. Don’t listen to the rhetoric, pull the trigger. You won’t regret it. I’m working on a piece as we speak. Do I feel queasy , absolutely, but I’ve done this several times in 20 years and have never regretted one. There’s a weird satisfaction about scratching, clawing, pinching and making it happen. Send it!!
 
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theDoorman said:
I have the chance to purchase some AG ground connecting to my farm. What is going rate ? Not sure on CSR numbers, just curious average rate per acre these days. Thanks
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A *lot* more information needed to give anything approaching an average "going rate" for Iowa AG ground. County/location, and CSR2 numbers are a pretty critical part of the equation. Feel free to PM me and if you want to tell me the property in question I can run the soil CSR2 numbers for you.
 
theDoorman said:
Don't mean to discourage you. Buying our farm was the best thing we have ever done.
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Windlooker said:
Buy as soon as you can. Don’t listen to the rhetoric, pull the trigger. You won’t regret it. I’m working on a piece as we speak. Do I feel queasy , absolutely, but I’ve done this several times in 20 years and have never regretted one. There’s a weird satisfaction about scratching, clawing, pinching and making it happen. Send it!!
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Appreciate it. We're saving as fast as we can for the down payment. Would love to also get the house paid off asap too.
 
Good buys are happening. For sure more than 1-2 years ago.
Wanted to make a quick point …. Actually 2….

1) Agree on above: BUY YOUR FARM - PULL THE TRIGGER if u able! I’ll always say that for the right people though. Never too late.
2) MAIN POINT!!!!…. Right now in the AG side of it…. Reminds me a lot of 2012-2014 when commodities went nuts… $7 corn & $15 beans. Ground prices went bananas. 2015 on…. Commodities went in HALF …. Top tier ground SOFTENED a good bit…. By 2018-2019…. Things we super slow, tight & tough!! Rents went down “a good bit”. Rougher areas…. Ag ground sales & rents went WAAAAYYYYY DOWN!!!!! SO…. I get to thinking… It’s essentially the SAME situation as 2015 & after - RIGHT?!?!?! ALMOST!!!!!…. One difference & this is a BIG ONE!!!!…… INTEREST RATES ARE DOUBLE!!!!! On top of commodities in half- the impact of double interest is insane. Operating lines at 8-9%. Farm loans 7-8%. & then think of everything else farmers buy: way more expensive.. double on fuel as well!!
Things got nasty around 2019 after commodities stayed low. Dunno how this shakes out but put all those thoughts in your head when u consider all the directions things COULD go!!!
 
Not a farmer but most on my dad's side are/ we're for the past 80 years.
As of now, between uncles,cousins ect, they own/ rent 20,000 acres .
Ain't NO WAY in Hell, crop prices can pencil out what land here is going for..., no way!!
20 years ago, the best of the best Red River Valley was fetching ( maybe) 2000.00 acre.
Nowadays it it going for about 6000.00
 
Bucksnbears said:
Not a farmer but most on my dad's side are/ we're for the past 80 years.
As of now, between uncles,cousins ect, they own/ rent 20,000 acres .
Ain't NO WAY in Hell, crop prices can pencil out what land here is going for..., no way!!
20 years ago, the best of the best Red River Valley was fetching ( maybe) 2000.00 acre.
Nowadays it it going for about 6000.00
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Long term investment. Money out there looking for stability. The amount of acres out there will never change. Guess they are in it for the long haul, willing to write off loses on their tax returns.


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Couple things to consider:

1) Been roughly 20 years since interest rates were at current level. Guessing there were plenty of land buyers in the market then who thought that land prices were out of control, just like there are plenty who think the same thing now.

2) In my occupation as a land agent/realtor I talk on a regular basis to a lot of different landowners who are looking at potentially selling. I'm always interested to know when they acquired their land and for how much $. I talked to a landowner the other day that said they bought their land for $100/acre in the early 90's. You know how often I hear from them: "Boy this land just seemed so dirt cheap at that time that I had to buy it!" Almost never. Every successive generation of land buyers thinks land is way more expensive "than it used to be". Really the only time that calculus changes is when land takes a marked regressive shift in price/value because of broader economic headwinds. Hardly anyone in 2020 would have said that southern Iowa hunting land at $3,750/acre was "dirt cheap"....but now, in Summer of 2024? No one would *not* say that price was dirt cheap if they found good southern Iowa hunting land at that price right now! You'd think it had terrible neighbors, or a hog barn next door, surrounded by public land, or was in wrp if you found southern Iowa land at that price right now.

The key is not to look at the price of land per acre compared to 5, 10, 15, 20 years ago. It's to look at the price *adjusted for inflation*, because the price of land isn't the only thing that has skyrocketed, so have a lot of peoples wages and their standard of living. If you thought a $40k annual 1-person income was a decent income 10 years ago, chances are good that now you'd think it needs to be more like $50-$60k.
 
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