Farmland Outperforms S&P 500
7 Towns Where Land is Free
As geonomists predicted, the business cycle keeps banging along its bottom. Yet in a bigger time frame, rural land for farms and for homes go in opposite directions. We trim, blend, and append five 2010 articles from: (1) Associated Press, Nov 30, on home prices; (2) CNBC.com, Nov 17, on free land by Colleen Kane; (3) Farm Industry News, Nov 20, on farm prices by David Hest; (4) The Real Deal, Nov 24, on retail space; and (5) The New York Times Readersí Comments.
by AP, by C. Kane, by D. Hest, by The Real Deal, and by Y. Pensack
Home prices falling faster in most metro areas
Home prices are falling faster in the largest US cities, and a record number of foreclosures are expected to push prices down further through next year.
The Standard & Poor's/Case-Shiller 20-city home price index fell 0.7% in September from August. Eighteen of the cities recorded monthly price declines.
The 20-city index has risen 5.9% from their April 2009 bottom. But it remains nearly 28.6% below its July 2006 peak.
Prices rose in many cities from April through July, mostly boosted by government tax credits which have since expired. Job worries and record high foreclosures are dampening buyer demand and weighing on prices.
The national quarterly index, which measures home prices in the nine U.S. census regions, dropped 2% in the third quarter from the previous quarter.
JJS: While land prices fell in major cities, they long ago hit absolute bottom in some country towns.
7 Towns Where Land is Free
Small towns suffer from a continuing flight from rural toward more urban living. In the great wide open, free land is available. As the US did with the Homestead Act of 1862, one even enacted its own homestead act of 2010.
New Richland is a town of about 1200 in southern Minnesota, 75 miles from the outskirts of the Twin Cities, offering lake recreation, many fine churches, and free 86' x 133' lots. Those who claim lots must build a house on the property within one year.
Marne is a southwestern Iowa community with a population of just 149 or so, about 60 miles from Omaha and 80 miles from Des Moines. In hopes of boosting that number, the Marne Housing and Development Corp has made four lots available for free. The first family to take advantage of the free land moved onto their new property the fall of 2008, also availing funds from the USDA's Rural Development Agency for building their home, and they qualified for $10,000 down payment assistance from the Southwest Iowa Planning Council.
With a population of about 12,564 and situated just 40 miles south of Lincoln (via the Homestead Expressway) and 99 miles from Omaha, Beatrice Nebraska aims to clean up neglected properties and get them to generate taxes and utility fees once again. Their Homestead Act of 2010 offers several parcels of land for free on a first-come, first-served basis. As with the original act, applicants must occupy their parcels of land for five years.
Curtis Nebraska (832 persons) in southern Nebraska's Medicine Valley offers two options for free-land claimers. The City of Curtis makes available free lots, and Consolidated Companies, Inc. created Roll 'n Hills, providing free sites on paved streets with all utilities for single-family homes.
Kansas has so much free land that there's an online hub of information -- Kansas Free Land. It links to more than a dozen communities, from Herndon, population 124, to Wilson, population 9,698, each with their own offers and requirements. Republic County offers free land for the right industry and free residential lots for new home construction.
The land itself is free services provided by the town such as streets, curb and gutter, water and sewer are not. The fee for these is about $25,000, which suddenly sounds a lot less like "free," but through Tax Increment Financing this number is reduced to about $14,000 for qualified candidates, which is paid over 15 years on a semi-annual basis along with real estate taxes.
Muskegon Michigan (pop. 174,344) grants to companies that will bring in 25 full-time jobs or more industrial park property for building, complete with all services, gratis. In addition, the industrial parks are situated in low tax "Renaissance Zones." The more jobs a company creates, the more land it gets and the less it pays for utilities. The 25-job companies are entitled to 50% off water and sewer bills, and the discounts increase from there, down to 20% of the full rate.
Camden Maine is the coastal exception in this otherwise-landlocked list of free land locales. The charming New England berg of about 4,052 citizens is offering 3.5 acres of land near Camden Harbor for a business that will create at least 24 jobs. The former industrial site on the Megunticook River, refurbished by the Town of Camden, comes equipped with 3 Phase Power, Sewer, Water, Cable, Broadband, and parking is available for up to 300.
JJS: While land prices in some country towns are zero, farmland prices in rural counties keep going up -- due to agri-business subsidies?
Farmland rents going up
Farmland values are likely to continue their long-term upward trend in 2011 at 4 to 5% a year after a brief pause in 2009 and early 2010. Cash rents in 2011 and 2012 are likely to reflect next yearís improved returns. But arenít likely to go much higher than that. This yearís high crop prices wonít last.
The amount of land for sale in 2009 and 2010 fell dramatically from 2008ís relatively active market. The trend is expected to continue into 2011. If you sold the farmland, where else would you invest the money?
Meanwhile, outside investors have been showing more interest in buying farmland. An Iowa farmland investment would have returned 4.68% per year from 1960 to 2009 compared to a 3.2% annual return to S&P 500 stocks.
JJS: Shop space shows the bottom in sight.
US retail availability to drop to 12.7%
Given an uptick in retail sales combined with a limited supply of space, CBRE predicts that demand for retail space will be positive -- barely -- for the first time since 2007. The amount of retail real estate available is expected to drop to 12.7% by the end of 2011. Still, landlords wonít be able to charge formerly peak prices for at least five years.
JJS: To flatten the boom/bust cycle, just recover the rents for land; then nobody will speculate in land. To make more land free and most affordable, share out the recovered rents among residents as a monthly dividend. Itís geonomics and it works; plus, some readers of the New York Times promote the tax half. Both of the comments by Yisroel Pensack deserve a recommend. click here
Editor Jeffery J. Smith runs the Forum on Geonomics.
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