The Farm Real Estate Economy :: essays papers

The raise Real Estate EconomyFarm genuinely acres de terminaline have increased continuously from 1987 to 1998, significantly improving the financial side of meat of many bring up businesses. But for the first time in over a decade farm real estate prices have begun to fall, payable in part to record breaking yields for crops and extremely low goodness prices. I believe the apprize of farm territory has increased at in addition fast a pace in relationship to value of farm action and is facing a major groceryplace adjustment. The farm real estate market saw its last major market adjustment in the mid 1980s (see figure 1), many operations went out of business and the banking industry lost millions. In many 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 ar in place to take some pro ficient losses if the federal government suspends its payments to farmers.Farmland currently accounts for more or less over 79 portion of all farm sector assets, which at a time exceed $900 billion. Some 52 percent of total farm sector debt, composed of either mortgages or short or intermediate term debt are secured by ploughland. Consequently, the financial security of farm sector borrowers and their lenders is stirred by changes in farm real estate values. Agricultural land values are primarily determined by the income earning potential 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 often gaunt 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 habitual as recreation destinations tend to be higher than would b e predicted found on agricultural returns alone. Research has found that 10 to 20 percent of the farmland in the United States is effected by population 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 problem is to the highest degree prevalent in the Northeast United States.