Real Estate Economics 156 Foldvary

Chapter 11, rural r.e.

Agricultural land value a function of soil fertility, price of crops, climate, water, subsidies, transportation, and expectations of urban expansion.

Half of US farmland is rented out.

Ownership of farmland is becoming more concentrated.

In California, water for agriculture is highly subsidized, raising land values.

Federal farm programs also subsidize agriculture.

P. 262: Need permits for some crops, such as peanuts.

Price supports raise the price of the crop, capitalized in higher land value.

The farm worker does not benefit.

P. 262: Farmland close to cities can be expensive because of expected urban expansion.

There is a speculative premium to the value warranted by the rent.

p=r/(i+t-a)

WWI: high price for crops. Borrowed to buy land. Then prices fell. Owners defaulted.

Also in mid 1980s.

Basic food has an inelastic demand. But supply is variable. So large swings in prices.

Non-agricultural rural real estate.

For retirement, recreation. Second homes.

Timeshares are not a good investment. OK for use.

Remote undeveloped subdivision lots are often bad financial speculations.