Red Steele Advisor
10:50 AM
Talked with a couple of bankers and a real estate attorney the last couple of weeks about land prices and the consensus was that the bloom is off the rose as far as high prices as of now, and the future is definately bearish. one lender said that some counties in MN that had $10,000 to $11,000 per acre sales, are now seeing $7,000 to $8,000 sales. The attorney says that "no sales" are regular as the mininum asking price isn't being met. The other banker said that he is telling people to watch for a big drop, bigger than anyone thinks is possible right now.
What do you think is going to happen? At what correction level do you jump in? Will we see a repeat of the 80's where land that had topped $4000 per acre dropped to under $1000 ? A move of that magnitude would take $12000 land all the way down to $3000. Maybe that still seems high to those that never bought any high priced land.
I know in my own area, its a mixed bag. Some land was for sale for $6000 per acre tillable, that wasn't all that different than what had brought $10,000 last summer, and it went without anyone jumping in and buying it. It was a large farm ,and some parts were irregular fields. Maybe it sold lately, but I know several farmers that looked at it and passed.
Personally, I suspect we will see land drop to the $5000 to $6000 range and hold. Just too much money in circulation right now...even if farmers are not making any money with their farming operations, most have paid off their debts and are capable of financing additional pruchases of land. If you have a stock portfolio, with the market at all time highs, now might be a good time to trim your holdings their and buy land if it hits a reasonable price.
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Hey Red, I think there would be some buyer`s remorse out there over some of the high priced land bought, but I doubt it, those that continue to raise their hand way into the 5 digits at a land auction aren`t wired for remorse
It`ll be bankers putting the kabotches to some of these high prices, if there`s enough "no sales" the bankers will get leary of even extending the $4,000/acre that they had. There were schemes to paying those high prices, like a farmer had the ability to go without a opperating loan, to shift that money into land buying money and then borrowing the opperating money. Some local elevators have hooked up with finance companies that would brrow coop customers money for i think 2% for opperating.
Corn price dropped 30% but inputs stayed the same and went higher..seed higher...chemicals higher...fertilizer a little lower but not much. If grain goes down a little or lot more, next year there will be alot of chickens coming home to roost. And that could lead to a cascade when a farmer may look at liquidating a farm to improve his cashflow, too many with that idea and it`s back to the 80`s.