Full text of Marriner S. Eccles Papers : For the Information of Chairman Eccles, Box 31, Folder 8, Item 14

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August 3, 1943
CEP
For the Information of Chairman Eccles
Farm Land Values. - Figures showing since 1912 the course of
farm-product prices, farm land value, and the number of farm sales are
summarized on the attached chart.
The average value per acre of farm land rose to a peak in 1920,
declined thereafter till 1933 (to a level more than 25 per cent below
that of 1912-14), then increased gradually until about 2 years ago and
then more rapidly, along with a sharp advance in farm-product prices,
between the spring of 1941 and the spring of 1943* The increase in land
values during the last 2 years has exceeded 16 per cent for the country
as a whole, and amounted to 20 per cent or more over large areas. The
number of farm sales per thousand of all farms, which as a rule has
seldom been more than about 30 per annum and which rose to nearly 50 in
1920, has been rising year by year since 1939 and was nearly 45 in 1942.
The farm mortgage debt, which was about #4.3 billions in 1912-14,
increased to more than $10 billions in 1923 and has been declining almost
ever since, most rapidly in the period 1924-26 and 1930-34. It declined
by more in 1942 than it did in 1941, and is now at a level somewhat under
$6.4 billions.
None of the foregoing figures covers very recent months. During
1943 "to date farm-product prices have increased somewhat to a level about
100 per cent above that of 1939* Farm land values have also increased
further, but precise figures are not available.




- 2 -

A substantial majority of all buyers during recent years have
been operating farmers, whose purchases have reflected the high and rising
level of farm income. As estimated by the Department of Agriculture,
net farm income, which approximated |4«7 billions in 1940, amounted to
about $6.7 billions in 1941, #10.2 billions in 1942, and is expected to
be between $11.5 and $12 billions in 1943.
Non-farmer buyers have been increasing in relative importance,
but are known to constitute considerably less than half of all buyers
and believed by some students of the subject to be not more than l/3rd
and probably less than that.
Residential real estate. - For residential real estate, information relative to the course of the price level and the number of transfers is not available on a precise basis. Over a considerable part of
the country, the price level for residential real estate has been rising
for about 5 years. Since the country began to prepare for war, prices of
residential properties have advanced considerably In many war-production
areas and have probably advanced somewhat in most other areas. In a number
of the war-production areas, but perhaps not in most of them, the advance
has at times been so rapid as to excite public comment. With new construction much reduced in most places, the activity in the real estate
market has in most places been rather moderate, but this does not hold
for some of the war-production areas. An important factor during the last
9 months has been the OPA rule, no?/ under fire in Congress, that requires
cash down payments of at least l/3rd on certain sales of residential property*




The volume of mortgage loans outstanding on one-to-four-family
houses was at its peak in 1930 at about $21 billions, from which it declined during the depression of the early 30* s to $17 billions in 1936,
and then increased from year to year to about $20*5 billions at the end
of 1942* The volume outstanding increased by about $1 billion in 1941>
and by l/2 that amount (or less than 1/2) in 1942* It is believed that
the rate of increase during recent months has been tapering off, and that
during 1943 the increase is not likely to amount to much (if any) more
than l/4 billion dollars. The principal reason why the rate of increase
has been slowing down has been, of course, the substantial reduction in
new construction. A substantial part of the increase, particularly in
1942, reflected new construction of the type covered by Title VI of the
National Housing Act, and there is ample reason to believe that during
the current year there will be no net increase in the out standings after
allowance is made for those insured under Title VI. In fact, there is
likely to be a net decrease of perhaps as much as 1/4 billion dollars if
the mortgages on war housing are excluded.
Securities. - It is known that the prices of unregistered securities, like those of registered securities, have been advancing but comprehensive data on the former are not readily available. It is a matter of
common knowledge that in the past purchases of unregistered securities
have usually been made on a cash basis.
Commodities. - At the present time, opportunities for speculation in basic commodities, either for the short term or for the intermediate term, seem to be quite limited, largely because of the direct or




- 4-

indirect influence of price ceilings. Iheat, for example, has no price
ceiling, but its price is influenced by the existence of ceilings on flour
and bread.
Accompanying documents. - In addition to the attached chart,
there is being sent along with this memorandum (l) a release of the
Bureau of Agricultural Economics, dated April 1943 and entitled "Current
Developments in the Farm Real Estate Market", and (2) a copy of "Land
Boom Controls", by William G. Murray, Professor of Agricultural Economics,
Iowa State College.




FARM LAND VALUE AND FARM SALES
INDEX
PER CENT

INDEX
PER CENT

250

250

200

200

I
1

•

/ /

k • PRICES OF FARM PRODUCTS
V I

(IMM-I4-I00)

I 1

\JX

150

A

i
#
i
#

A
/ \

FARM 1 AMn V/AI n c V .

100

150

m

100

(PER ACRIi. 1912-14 -100)

50

50

0

i

i

i

i

i

i

i

i

1

1

1

1

i

i

i

i

i

i

i

i

i

i

i

NUMBER PER 1.000 OF ALL FARMS

NUMBER PER 1.000 OF ALL FARMS

50

i

50

NUMBER OF FARM SALES
(VOLUNTARY SALES AND TRADES)

25

25

1910




1915

1920

1925

1930

1935

1940

1945

April 1943
UNITED STATES DEPARTMENT OF AGRICULTURE
Bureau of Agricultural Economics
Washington, D. C.

CURRENT DEVELOPMENTS IN THE FARM REAL ESTATE LiARKET

Sharp increases in land values characterized the farm real estate
market from November 1, 1942 to March 1, 1943. Fear of labor and machinery shortages and increased income taxes continued as factors modifying prices and the demand for land. Those influences, however, were
more than offset by current high levels of farm income, sustained investor interest, decrease in number of farms-iiaid by unwilling owners, and
higher and firmer asking prices of other owners. As in the first 3
quarters of 1942, operating farmers during the last quarter continued to
make up a substantial majority of all buyers, but non-farmer buyers
increased further in relative importance. Some seasonal increase in
sales activity occurred, although the volume of sales for the country as
a whole was somewhat below that of a year earlier.
Sharp Rise in Values
The Bureau of Agricultural Economics' preliminary index of average
value per acre of farm real estate (1912-14 = 100) rose from 93 on November l/ 1942, to 99 on March 1, 1943. The March 1 index was 91 in 1942,
as compared with 85 in 1941, 84 in 1940, and a low of 73 in 1933. Values
on March 1, 1943, were 36 percent above the 1935 low, about even with the
1912-14 base, and 42 percent under the 1920 peak.
The 9 percent increase during the year ended March 1, 1943 was the
largest annual increase since 1920. This rate1 of increase is practically
equal to the rates of the years 1917-16 and 1918-19. It is significantly
exceeded only by the record rate of increase for 1919-"20,
:
Values advanced in all geographic divisions during the past year,
and in c*ach of the 48 States. Values rose 12 percent 'in the East South
Central States, which was more than for any other region. Increases
almost as large occurred in the Middle Atlantic, Wrst -"North Central,
Mountain and Pacific geographic divisions, where advances of 10 percent
were reported. iTith the exception of a 3 percent rise in farm land
values in New England, 'increases in the 3 remaining regions ranged from
7 to 9 percent.
—
. The largest State increases were reported in Kentucky and Kansas,
where values were up 14 percent. Increases of 12 percent or more were
reported in 9 additional Status, while: 12 States reported increases of



w

- 2 -

from 10 to 12 percent. In only 7 States were increases of less than
5 percent reported. For nearly a l l regions and States a substantial part
of the increases during the. last year occurred since last November.
Measured from 1935-5-9 averages, values have increased almost twofifths in the East South Central States and more than one-fourth in the
East North Central and South Atlantic divisions. Rises in other geographical divisions ranged from 24 percent in the Mountain States down to
6 percent in Itew England, rith an increase of 20 percent for the country
as a whole•
In some individual States ana in particular areas within States,
much larger increases than- these have occurred. A rise of more than 50
percent from the 1935-39 average is reported for Kentucky; more than
40 percent for Indians and Tennessee; and more then 30 percent for 8 other
States. In North Bikota, South Dfekota and Nebraska values are s t i l l below the 1935-39 averages despite substantial increases during the past
tiro years.
Table 1 shovrs the in-dex of values per acre on March 1 for selected
years, and for July 1 and November 1, 1942, by geographic divisions.
Table 1,—Farm Real Estate: Index numbers of estimated value per acre, by
geographic divisions, selected years, 1912-43 V
(1912-14 = 100)

Year

New ;kiddle'
Eng- : Allan-(
land

tic

:

South : East ] West :
United
North ;Atlan-] South \ South ;Moun-] Pacific]States
Central Central\ tic 'Central' Central tain
East
North

ffest

191?
9'.)
07
97
98
1920
140 - 136 : 161 I 184
127
1925
126
114 : 116
127 - 106 :
1930
96 i 109
105 • 02 I • 6 2
1933
64
1934
: 104
83 :
65 :
67
1935
; 104 :
85 :
68
68 :
1936
: 105 :
88
72 : 71
I 107 :
1937
89 :
76 :
71
1938
10G 1 90 :
78 s
70
1939
: 105 !
39 :
77 t
67
1940
: 106
90 :
65
73 :
1941
91
107
65
80 ;
1942
Mar. 1 i 109 :
94 :
89 ': 69
July 1 2/ 109 !
94 :
c.<7 :
68
95
Nov.. 1 2/ 109 :
90 v :
70
1943
i
•
96 :
Mar. 1 V 112 ! 103 :
76
"T7
2/

i
,
:
:
!

98 :
198 ;

148 :
128 :
80 :
87 i
93 j

:
97 :
: 104 :
: 106 :
: 106
: 107
. 110 !

97
96
199 s 177
141 : 144
128 < 136
79 :
82
85 <
88
93 : 91
96 i 94
96
.102
107
109
112
115

! 117 : 126
: 117 : 126
: 121
128

:
!
:

:

98 :

s 151 :

.94 i
156 :
146 j

: 105 «
: 102 : 142
96 !
! 69 :
97
j 69 :
• 70
101 :
73 1 105
• 75
110 :•
75
109 ;•
99
97 : 75 1 107 :
76 5 108 :
99
78 -, 109i
99

• 105
: 104
: 105

8 4 : 115 \
1 86 : 119 :
: 89 \ 120 :

•

127
115
73
76
79

82
85
85
84
84
85

91
91
93

i

i 127.:

141 i! 112

! 92 \ 126 \

All farm land with improvements, as of March 1 only, to 1942.
Preliminary.




97
170

99

- 5 Volume of Transfers Continues Hi|
Frequency of voluntary sales during 1942
any year since the boom period of 1919-20, with
the country as a whole, the volume of transfers
what below the levels of comparable periods the

continued higher than in
exception of 1941. For
in each quarter ran someprevious year.

In the l a s t quarter of 1942 general regional increases in sales
frequency, beyond seasonal movements, appears to have occurred only in the
Southeastern States and in the Pacific Northwest, where brisk market
activity was reported. However, extra-seasonal increases were registered
in a considerable number of States and counties within other regions.
Little change was reported from the previous proportions of land
purchases made by farmers. Incomplete data indicate that these purchases
continue d to make up almost three-fifths of a l l voluntary transfers. In
the Northern Groat Plains, farmora intending to operate the land were
buying three-fourths of the land sold. In the North Central region, the
corresponding ratio was two-thirds. In. Illinois only about two-fifths of
the buyers were fanacrs. Tenants bought about one-fifth of the tracts
transferred in the North Central region in recent months.
In the East North Central States and in other areas whore land
holdings of institutional lenders are no longer important, sales by
active farr.iors and by estates are now a more' significant element in the
mnrket. In the Northern Plains region, however, somewhat more than half
the sales arc being made by private corporations, public credit'agencies,
and States and counties. Although corporate and public owners are rapidly
liquidating their land holdings in this region, these sources of supply
will be a major factor in the market for some time.
Despite the increase in sales by active farmers, a substantial net
movement of land into the hands of owner-operators continued. This movement was most marked in the Northern Plains and least evident in the
South. In several Corn Bolt States, investor buying and farmer selling
have considerably reduced the "operator purchase-sale r a t i o . "
Financing of Purchases
Further increases in the proportion of cash purchases were recorded
during recent months. This development reflects the huge amounts of liquid
purchasing power held by individuals in demand deposits. Moreover, the
increase of purchases for cash has occurred in the' face of extremely easy
money conditions.
In practically a l l the better agricultural areas, and to a considerable extent elsejwhorr, thorc is keen competition among some classes
of lenders to plnce farm mortgage loans. In many parts of the country,
an increasing proportion of the loans for financing farm purchases are
1



- 4being made by local commircinl banks and individuals.
•In most sections, ratios of lo.ins to sales prices have shown little
or no increase; but this fact indicates that a3 salea prices increased,
the absolute amounts loaned on comparable farms also increased. Interest
rate! on farm Mortgage loans have continued nt low levels, with rates of
4 percent and under often reported in the better farming areas.
Data from selected counties in the North Central region'indicate
that only r. little more than half the tracts bought in the fourth quarter of 1942 vrere mortgaged after purchase. Where mortgaged, the average
percentage equity of buyers was 35 percent. Sellers took a substantially
smaller proportion of the now mortgages in the fourth quarter of 1942 as
compared with the first half of the year. N< w mortgage loans not made by
the seller came chiefly from local banks.
In the Northern Plains, according to sampler data for the fourth
quarter of 1942, &O9h sales were 53 percent of all recorded voluntary
transfers. Mother 18 percent involved mortgages, and the remaining
29 percent were sales by contract for deed. An ndditional undetermined
number of sales by contract were unrecorded. The average percentage
down payment was 38 percent of the purchase price in sales involving mortgages and 23 percent in recorded sales by contract for deed. The number
of second mortgages increased considerrbly.
A substantial proportion of the mortgage loans now being made by
conanrciftl banks and individuals are for five years or less; many are
for only one or three-year terms. Purchasers of land are attracted by
the ease of obtaining funds fron these sources. Small-town banks and
individuals seldom require more than casual appraisals; loans are usually
nade without delay; no stock purchases are required; and interest rates
are frequently as favorable as those of insurance companies and the
Federal land banks. However, there is danger that buyers giving shortterm mortgages may later encounter difficulties in renewing or refinancing
their loans.
Influences in the Land Market
In most parts of the country, the predominant forces now operating
in the land market sten from the condition of high farm commodity prices,
record levels of farm incomes, rnd a large accumulation of liquid funds
of fprners and others.
March 1943 levels of farm product prices were almost 16 percent
rbove the average for 1942. Net income to farmers in 1943 is expected
to be in excess of the estimated record 10.2 billion dollars for 1942.
Demand deposits of country banks (Federal Reserve System members only)
in 20 leading agricultural States more than doubled from January 1940 to
January 1943; and more than three-fifths of the increase occurred in 1942.




P'or most fane If and for many residents of small tovms in agricultural areas, land or loans on land constitute the only major type of
investment, other than war bonds, seriously considered. The strong underlying propensity to acquire land is being increasingly implemented by
growing funds of purchasing power* Demand for farms appears to be increasing generally, but l i t t l e evidence of purely speculative activity
has been reported.
At the same tine, reports indicate that market supply of land for
sale is decreasing. As the land holdings of lending institutions are
liquidated, this source of supply cones closer to the point of exhaustion.
Recent r.nd current purchases ?re, for the most part, in the hands of
operating farmers and investors who arc not at present particularly interested in reselling. Listings of fp.rais for sale, especially tho better
farns, have tended to decline in most areas. Asking prices have advanced
sharply in many of the better agricultural sections, and apparently an
increasing proportion of fan.: real estate is not for sale at existing
market values. In most areas, the average quality of land on the market
has declined during the last two years.

j^

In opposition to the value-stimulating forces is a number of
bearish elements. Those factors include fear of shortages of farm labor,
machinery, equipment, rnd f e r t i l i z e r s , and transportation difficulties.
In addition, income taxes and purchases of war bonds — with the prospect of an increasing flow of individuals' funds to Government — have
probably dampened to some extent the demand for fnrms.
Further, m-'iny farmers and others are s t i l l acutely aware of the
long-run disastrous results of the boom in farm real estate during and
after Yforld War I . Substantial recessions in f&ru commodity prices
sometime after the close of the present war would bring lower farn incomes, which would be incapable of sustaining an inflated level of land
values.

: