The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
• It ri Federal Reserve Dank of Chicago July 25, 1958 FARM LAND VALUES continued their sideways movement this spring. Reports from country bankers in the Seventh District show that from April to July values are substantially unchanged although above the levels of year earlier. Bankers in Michigan estimated values at 2 per cent below April while bankers in other states estimated little or no change in values. tte All this suggests a breathing spell has been reached in the rapid advance in farm land prices of the past few years. However, the potential of further increases remains. While the estimates of land values were essentially unchanged, 22 per cent of the bankers estimated the underlying "trend" in land values to be up. Only one banker out of twenty thought the trend was down and nearly three out of four said it was stable. This was an upward shift in expectations from the April survey when only 18 per cent of the bankers thought the trend was up and 9 per cent said it was down. • Number 466 U. S. DEPAR Changqs A tin_exuctations have apparently played a predominaTirla4n41ie movement of land prices. With the continued inflation after the end of the Korean War, land became a "hedge against inflation." Coupled with declines in returns- on other types of investment, such as yields on common stock, this led to a willingness to purchase land at the current prices even though the rate of return was not as large as during the previous decade. This motive seems now to have been dulled, if not stopped. The bankers report that farmers this year are spend. Historically, farm land prices have fluctuated with ing money cautiously, repaying debts and refraining from the movements in farm prices and farm incomes. During undertaking new debts. Of course, if a real shooting war both World War I and World War II these measures exshould break out in the Middle East, this would all be perienced large rises. After World War I the sharp drop changed. in farm prices and incomes was accompanied by a decline in land values. However, when it became evident The future trend of land values, of course, remains that farm land values were beginning to drop after World uncertain. Over a fairly long period of years, farm inWar II, the Korean War brought a new spurt to prices. come must play a key role in determining the trend. However, some hold views much less uncertain than others. The puzzling event has been the resurgence of land A large farm management firm, for example, has recently have been explanations values since 1954. Numerous stated: "The question is not, 'Will land p- rices go up?' put forth, but they have had to rest on factors other than but, 'How fast will land prices advance?'" The present farm income. A number of factors have pointed toward leveling off of values, in this context, would be merely a lower rather than higher farm land prices in the past temporary interruption of an upward surge. On the other several years—the decline in farm prices and income in decline hand, it could signal the end of a 25-year rise. the and rates interest until 1957, increases in and prices farm when year, this Now, farm population. Research Department incomes have increased, land values have leveled off. per cent, 1947-49:100 150 100 \%ye° % price of farm land • %4.0 e.4% e 50 • • ofI • ‘ % • "t. elf ,#'1%................" % . 01111 WO % • % 1 .V . s realized net farm income No' I 1915 1920 I I 1925 I Ii 1 1 1 1 1 I 1935 1930 III 1940 1945 1 1950 1955 s Per cent change in dollar value of "good" farms April 1, 1958 to July 1, 1958 (based on reports of Identical banks) Per cent change April 1, 1958 to July 1, 1958 Illinois Indiana Iowa Michigan Wisconsin SEVENTH DISTRICT • • • '0 —1 —1 —2 -1 -1 * Figures not Included due to limited number of reports Current trend in farm land values based on opinions of country bankers as reported in July, 1958 Per cent of banks reporting trend is: Up TOP: CENTER: Stable BOTTOM: Down Illinois Indiana Iowa Michigan Wisconsin SEVENTH DISTRICT Up Stable Down 23 22 23 15 29 22 73 72 76 77 65 73 4 6 1 8 6 5 •