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Farmland defies the real estate doldrums

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HOST: Well later this morning, we’ll get a look at how well new homes are selling. Analysts are predicting a slight uptick for last month but we’re still on track for the worst year of new home sales in half a century.

There is one kind of real estate, though, that’s on a tear as Marketplace’s Jeff Horwich reports.

Jeff Horwich: The price of farmland has been growing faster than corn in a hot July. Prices are up more than 20 percent this year in parts of the Midwest. In Nebraska, farm bureau president Keith Olsen says his own land’s worth three times what it was five years ago. Bidding wars are common.

Keith Olson: Neighbors get to fighting between who should own that quarter in between them. A lot of farmers have cash right now and they are buying land at a very high price.

Crop prices are up, so it’s tempting to expand. Interest rates are low, so it’s cheap to borrow. And both these things could change. Economist Robert Shiller called the tech bust and the housing collapse before they happened.

Robert Shiller: People often ask me, where is the next bubble? It’s possible that it could happen in farmland.

But there are also real reasons for rising prices: The amount of farmland is essentially fixed, while the population keeps getting bigger and hungrier. And farmer Keith Olsen says new technologies make his dry, western Nebraska acres more productive — and more valuable — every year.

I’m Jeff Horwich for Marketplace.

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