Will farmland prices crash is a popular question that our agents are receiving a lot recently. With what is going on with the world these days there are a lot of nervous people wondering. There are several interesting factors going on that come into play.
As like any other time where we get a downturn or a shock to the economy, highly leveraged farmers are challenged to weather the storm. So many farms in Montana have been priced with a premium for recreational or development value. During these shocks, if they are long enough in duration values trend back in the direction of being priced for agricultural value.
Low interest rates can also affect the pricing of any real estate in both directions. Easier to get into and purchase land can drive acreage prices up but when the income is not there to support the asset, low-interest rates can give a false sense of security. After all, you still have to pay for it.
Our government is heavily stimulating the economy which means at some point inflation becomes a driving factor. When will that be? Well, we are definitely living through interesting and unprecedented times and that is the $64,000 question. Does the economy go into a deep recession or do we have a V-Shaped Recovery versus the dreaded U-Shaped Recovery?
My personal belief is we have never had the amount of stimulus that is going to be thrown at the western world in a combined effort from this many world governments. That money has to drive inflation in real assets at some point. Politicians have a choice. Cut spending. Yeah right! Or they can make the currency worth less to where the deficits they are running are worth less in real dollar terms. I vote for the politicians to take the easy way out. My opinion is we are going to see some short-term softness in the market driven by uncertainty and financially strained farms and ranches. How long short-term is, will be anyone’s guess. Once we are over the virus and stimulus starts in earnest, we should see land prices rise dramatically.
So that gives you one person’s educated guess on farmland and ranch prices. If you are starting the journey for buying or selling farmland, please feel free to reach out to discuss your situation. I love talking land and can help you with the complicated process of finding or selling the right property
Buzz Tatom is an Advisor/REALTOR® for Engel & Voelkers in Montana. He specializes in farms and ranches. A ranch owner himself he knows the complications that a buyer or seller will go through and is able to help navigate the complicated process. Give Buzz a call or fill out his contact form and put him to work finding you the right property so you can start building memories with friends and family!