ASFMRA: Trends in California land value
The largest land value increases were in open farmland, with ample irrigation water that could be planted to permanent plantings. With the decline in the housing market, there have been instances where undeveloped rural housing subdivision lots have been purchased in bulk and planted to permanent plantings.
Does the rapid increase in land values indicate the danger in a crash in the market? The market is still strong and the economic outlook is still good, however, the largest concern is the future of foreign demand. A strong dollar and reduced Chinese demand for products could significantly impact grower’s profitability. Lower profitability in the agricultural sector, combined with higher profitability in stocks and bonds could result in a rapid exit by investors from the agricultural land market. In the early 1980’s, a modest increase in the land on the market, along with low commodity prices, resulted in a nearly 50 percent drop in agricultural land values. Let’s hope that history doesn’t repeat itself.