Land prices.

birddude

birddude

Well-known member
If any of you guys are thinking about buying some ground, you might want to do it now. We were looking for 40-80 acers a few years ago but prices got out of hand before we got it done. It seemed like it took a few years or so before the prices raised out west so just to let you know, the prices here are still going crazy. Two parcels sold last month. Both were marginal farm ground. 46 acers went for 20k per, then a month later 80 acers for 25k. A lot of folks around here are thinking of selling out. Re-claim coal mine ground is selling like hot cakes for hunting.
 
Where are you located? Your bio has nothing. Those are crazy prices for marginal productive ground. Are you just outside of Minneapolis? The "coal mine" has me wondering....what kind of hunting? It must be great hunting and a bunch of big money around you. The good news is that it isn't getting bought-up for residential or commercial development....which at those prices is surprising.
 
remy3424 said:
Where are you located? Your bio has nothing. Those are crazy prices for marginal productive ground. Are you just outside of Minneapolis? The "coal mine" has me wondering....what kind of hunting? It must be great hunting and a bunch of big money around you. The good news is that it isn't getting bought-up for residential or commercial development....which at those prices is surprising.
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Southern Indiana. In the middle of what was the most coal veins in the state. That's where a lot of the money is coming from, but the land prices seem to spread to other states eventually. Re-claim ground that's not put back into farm ground is the last stand for quail and rabbits. Of course, deer do quite well there also. But only one of those farms was reclaim ground, The other was what's called around here as sugar sand or Blomfield sand. It can have ok yields with enough rain but terrible without enough. Prices here seem to spike then fade some. A lot of the re-claim ground will have ponds and lakes left on it. It's been running around 10k per acer. That's just for recreation as you can't build on it for decades because it settles for a long time. Then all of a sudden, you'll hear the above stories. They are absolutely true.
 
Good ground in my area is going between mid teens and mid 20s per acre...most is upper teens per acre. There was a 80 with 62.44 of tillable ground that sold $10,300/acre. A 40 just sold this month for $17,500/acre, that was better ground, all tillable. Not much close to me is sold for hunting, all too productive (expensive) for that. Just a few pockets or rough stuff here and there. It is hard for PF, the county or DNR to acquire ground unless it is a donated parcel....they are lucky to afford ground at a third of these prices near the Missouri River, which there is some there or low/wet stuff near the MN boarder, but these days commercial buyers would want that ground to drain and build on. These prices make increasing public ground about impossible. CRP is the only thing that will sustain a decent bird population in Iowa and that is not popular with many, even some here.
 
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I would buy tillable ground then cash rent to local farmers with the understanding that you control hunting rights. You may unlock their land to hunt on as they will want to continue to stay on your good graces. Not sure how it can ever pencil out but maybe the endeavor is just considered a long term investment for some since land will always continue to increase in value.
 
Land has HISTORICALLY increased in value, but there are no guarantees/absolutes. Remember the mid-late 1980's? I do because I was an ag banker when corn, at interior points in Iowa, was selling for $.98/bushel. Land prices in the midwest, in most places took a dive. It can happen again. Consider this: Corn prices are down, safe investments (ie some CD's) are paying 5.5-5.85 in my area and the weather is crazy. Not an optimum scenario for farmers to buy land, and investors have alternatives. Farmers look to have tougher time of it this coming year. That said, the most wealthy farmers will pay up for the best ground (well located, all tillable, good deep mollisols, level topography on all weather roads) and will forget what it cost once it's paid for....but again, nothing in life is certain...
 
Wolfchief said:
Land has HISTORICALLY increased in value, but there are no guarantees/absolutes. Remember the mid-late 1980's? I do because I was an ag banker when corn, at interior points in Iowa, was selling for $.98/bushel. Land prices in the midwest, in most places took a dive. It can happen again. Consider this: Corn prices are down, safe investments (ie some CD's) are paying 5.5-5.85 in my area and the weather is crazy. Not an optimum scenario for farmers to buy land, and investors have alternatives. Farmers look to have tougher time of it this coming year. That said, the most wealthy farmers will pay up for the best ground (well located, all tillable, good deep mollisols, level topography on all weather roads) and will forget what it cost once it's paid for....but again, nothing in life is certain...
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All great points but when looking at any timeline of 10 or more years I think you would be hard pressed to find a period when land didn’t appreciate. It doesn’t appear the increasing interest rates have slowed land price increases much and definitely have not had them go lower. Small snap shot over the last 3 years in the area of SD we spend our time in and have quite a few connections there. In 21 the first land sale auction to surpass $4000 an acre happened. The people I talk to out there were blown away that someone would pay that. For the rest of 21 and first half of 22 or so sales bounced around that price area. Marginal ground in the 3000’s and some better ground up to as high as $4800. Again, locals thinking people are crazy. Second half of 22 and through most of 23 saw marginal ground continue to increase slightly and best ground stay consistent to slightly higher. This was as interest rates were going up. Then this fall the SHTF in regards to land prices. 480 acres brought 7200. Had 4 phone calls/texts with in 25 minutes of the gavel dropping telling me about it. People couldn’t believe it. Wasn’t but a month or two later and another sale for very good land brought over $9000. I am not insinuating that is the now “going rate” but I doubt we will see any marginal ground going for less then $4500 going forward in that area. Not saying it is going to increase at this same rate as the last 3 years but also don’t expect it will drop. Feel lucky to have bought in early 21 before this most recent run up.
 
When we discuss land prices, we must refer to exactly where we mean, which you did. But not all of the midwest experiences the same factors which affect land prices. I still receive the Federal Reserve Bank's results of their survey of ag bankers which discusses not only land prices but rates being charged for operating loans, farm real estate loans, cash rents, and expectations on the ag economy of the near future. The rates of increase vary by state and by areas within states. It's easy to point to the latest "record" prices--- in Allen County, Indiana, where I worked for the Federal Land Bank, I appraised a farm in 1980 for $3,500/acre. Last year it sold for $19,990/acre. But it was Class A farm land, systematically tiled every 50 feet, Houghton muck soil and highly productive. What would such a farm sell for today, or next year? Who knows...no guarantees !!
My point is, every farm is different. I could show you a graph that Purdue Ag Econ puts out that shows that every year since 1900, ON AVERAGE, farmland has increased in value by 4%. But I'm here to tell you, there were periods in that span---the 1930's, the 1980's... where it not only didn't increase, but substantially decreased. Here's hoping for the best for agriculture.
 
WC, if you worked for the Fed Land Bank in the early 80s, I bet you saw many farms that were taken/given back and you refinanced or sold for half or a third of the originally purchase price.
 
I started at Production Credit Association in 1974, and watched inflation in land and equipment "help" the farmers in the mid-1970's through the early 1980's. Their net worth went up--but it wasn.t "earned" net worth for many; inflation made balance sheets look good. Then came the "farm crisis" (and crisis it certainly was!!) in the mid-1980's.....my area was one of the lucky ones--Allen County--Ft. Wayne Indiana was rich in outside income opportunities and most of my guys were part time farmers with off farm jobs. I saw it all---lots of stress and anguish. I still can't watch the movie "Country", I see too many faces that bring back bad memories.
 
We're setting up for another 80s train wreck. There are a lot of farmers in trouble, when you have to have good to record years to break even with inputs and land prices but have going on 3 yrs now of bad crops it doesn't work. There are farms that have equipment sitting on bank property right now and you'll see some forced land sales coming down the pipe too. Shiny equipment and fighting investors/outfitters for land doesn't work. The unrest is real.
 
I'm right there with you, GTP, I've seen some of their financials. I hear guys say--"corn CAN'T go to $3.50!" And I have to say "what's to stop it?" We saw this in the 1980's--
The American farmer is an excellent producer--but he needs a market to sell to---one that can actually PAY for what he produces.
 
It's a scary situation, watch and see what happens to this already depleted cattle herd. We're going to see record prices for the animal that is costing them a fortune to pasture and feed right now. These guys won't be able to load their trailers to head to town fast enough. When you can now eat shrimp in Kansas cheaper than beef this isn't working.
 
GetTothePoint said:
We're setting up for another 80s train wreck. There are a lot of farmers in trouble, when you have to have good to record years to break even with inputs and land prices but have going on 3 yrs now of bad crops it doesn't work. There are farms that have equipment sitting on bank property right now and you'll see some forced land sales coming down the pipe too. Shiny equipment and fighting investors/outfitters for land doesn't work. The unrest is real.
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As an aspirational land buyer, I hope you're right that prices will come down. As a friend and beneficiary of many landowners/producers, I hope it's nothing like the 80s.

My real point, though, is that haven't we been saying this for a while? In Kansas at least, we've seen 2 if not 3 years of sub-par harvests and maybe a year's worth of interest rates that have eclipsed anything we've seen in the last 20 years or more. In that environment land prices are stable to slightly up, and you could only say that if you were talking about land with absolutely zero deer hunting potential. If there's deer hunting, prices have continued to escalate. Who knows? Maybe it's coming.

If I were 59.5 years old I would be rolling over every dime from my 401(k) into an IRA and buy land with it.
 
I hope you get a piece Matto! If we would get to the early 80s interest rates and really hope we never get there again, and you have the cash available, that would be the time to buy recreational ground....a lot few buyers in those markets and more sellers. That wasn't fun for anyone...unless you had cash saved.
 
matto said:
As an aspirational land buyer, I hope you're right that prices will come down. As a friend and beneficiary of many landowners/producers, I hope it's nothing like the 80s.

My real point, though, is that haven't we been saying this for a while? In Kansas at least, we've seen 2 if not 3 years of sub-par harvests and maybe a year's worth of interest rates that have eclipsed anything we've seen in the last 20 years or more. In that environment land prices are stable to slightly up, and you could only say that if you were talking about land with absolutely zero deer hunting potential. If there's deer hunting, prices have continued to escalate. Who knows? Maybe it's coming.

If I were 59.5 years old I would be rolling over every dime from my 401(k) into an IRA and buy land with it.
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The sad thing is it will be the farmers and ranchers that take the brunt of it. These investors will just break the pieces up and try and get their money back that way when they decide its time. It doesn't hurt as bad when it's spread out over a group of folks just trying make a quick buck or hide money.
 
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