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S Illinois | Locally, land prices coming down was a follower not a leader. They were actually the last thing to come down. The biggest driver was banks and lending institutions putting the brakes on operating credit and high interest rates. When the next growing season came around and the bank would not extend credit farmers were in a tough spot and had to liquidate assests. We are in a completely different situation at this point with very cheap interest rates. Additionally the amount of financing done by seed, equipment and input suppliers is another caveat that was not around during the 80's.
The land buyers around here are no where near as leveraged as was the case in the 80's. In the 80's, many farmers had as much borrowed ground as owned. That lead to a rapid problem when income went south quickly. Nowadays buyers around here are leveraged more on a 5:1 or 10:1 range. That ratio makes liquidation sales much less likely. Additionally, profits are still being made at current price levels and many operations buying ground will be recapitalized after a few years of profits. From my point of view we are still in a 77-78 time frame. It will take a few years of negative profits to finally cause prices to drop significantly. Also interest rates will need to rise and an abnormal amount of ground must hit the market at the same time. If we do get a fire sale, many who are holding out for cheaper prices will continue to hold due to fear. People who have been buying will continue to buy. | |
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Land prices have stage 4 cancer
