The Farm Real Estate Economy :: essays papers

The Farm Real Estate EconomyFarm truly earth note determine commit increased continuously from 1987 to 1998, significantly improving the pecuniary position of umpteen spring up businesses. But for the first time in over a decade elevate real estate prices have begun to fall, due in part to record breaking yields for crops and extremely pathetic commodity prices. I accept the value of farm consume has increased at too fast a pace in relationship to value of farm production and is facing a study market adjustment. The farm real estate market saw its last major market adjustment in the mid 1980s (see figure 1), virtually operations went out of business and the banking industry lost millions. In some cases the value of the note the bank was carrying was in excess of the value of the land securing that note. Although the market adjustment I anticipate will not be as drastic as the crisis of the 80s, I do believe many lending institutions are in place to take some serious lo sses if the federal government suspends its payments to farmers.Farmland soon accounts for slightly over 79 percent of all farm domain assets, which now exceed $900 billion. Some 52 percent of measure farm vault of heaven debt, composed of either mortgages or short or median(a) term debt are secured by farmland. Consequently, the financial security of farm sector borrowers and their lenders is affected by changes in farm real estate values. inelegant land values are primarily determined by the income earning possible of the land, as measured by expected returns from crops and livestock. However in many areas, nonagricultural factors are playing a greater role. Where non-farm influences are involved, farmland is ofttimes drawn out of agriculture for residential, commercial, or recreational uses. Farmland values in rapidly urbanizing areas, like the outskirts of Lincoln for example or in areas popular as recreation destinations tend to be higher than would be predicted based on agricultural returns alone. Research has found that 10 to 20 percent of the farmland in the United States is effected by community expansion. This may seem like a small percentage of the total farmland in this country but in many instances in urban areas land is valued at five times its production capability, or higher. This however is not taken into consideration when valuing the real estate in the farm sector as a whole. This line is most prevalent in the Northeast United States.