Farmland and home prices
Date posted: December 29, 2011
Most home prices have taken a big dive in recent years, but this real-estate trend hasn’t affected all land, says N.C. State University economist Mike Walden.
“One of the positives for landowners over the last, say, decade has been in farmland. We’ve seen farmland prices go up. In fact, one national index of farmland showed that the average price of an acre of farm land has doubled in the last six years.
“Why? Well, because of what the land can grow. And, in particular, basic farm commodities like wheat, corn and soybean prices have skyrocketed. Therefore, that land on which those commodities are grown has become more valuable. This has clearly helped the real-estate component, if you will, of a farm community.
“Now some economists, though, worry. They worry that just like we had a big boom in the land devoted to residences … and then we had a crash — of course, we’re all dealing with that crash — we could potentially see the same thing happen with farmland.
“And, in fact, it has happened. If you go back 20 years, 25 years, we saw a similar boom in farmland prices and then a decline. So I think that folks who are engaged in … farmland real estate certainly they have smiles on their faces right now, but they do need to be cautious. They do need to monitor these trends.”
Category: Economic Perspective