Farm prices are going through the roof, at least in Colorado, Kansas, Missouri, Nebraska, Oklahoma, and Wyoming ? the area monitored by the Kansas City Federal Reserve.? Both irrigated and non-irrigated land prices have essentially tripled in the past 10 years, with the most recent appreciation of a strong 27 percent in the past year to the second quarter.? Many foreign investors are said to be buying farm land even without an on-site visit on the assumption that crop yields will easily cover any borrowing interest cost.? High food prices and livestock prices are helping, though only if farmland has not been impacted by a drought.
Higher farm land prices will mean higher home prices in the cities that have some exposure to the farm economy.? The local economy of Des Moines, for example, will get more vibrant as farmers spend their money.? Further, expansion of new?home building?into the distant suburbs will result in somewhat higher final home prices because of the higher land price.? That in turn will mean less competition for cheaper homes in outlying regions outside of Des Moines.? So the home values in the Des Moines area will also get some lift.
The ultra-loose monetary policy around the globe has resulted in very low interest rates for savers.? Therefore, some have been hunting for higher yields in farms.?? But now with such high prices for farm land, some investors may look for rental income from tenants to get a higher yield.? The latest consumer price index showed no sign of broader inflationary pressure, but the rent component has been rising.? Suburban rental homes, anyone?
Source: http://robertcpaul.posterous.com/farm-land-prices-surge-pound-ridge-ny-real-es
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