Investors plow cash into farmland
Source: Tulsa World, by Rod Walton
February 02, 2008
The couple who owned the big ranch near Beggs knew their land was worth something, maybe $500 an acre. They had no plans on selling anyway.
Then Realtor Rick Miller approached them with an unsolicited offer from a buyer willing to pay $1,200 per acre. They still refused but, wow, they learned some surprising news about the farmland market.
Some U.S. housing markets and Wall Street may have plunged lately, but rural property values are still on a steady rise.
"Do I see people wanting to buy more farmland? Absolutely," said Miller, who runs United Country Realty in Beggs.
"What is up is that people want to move to the country," he added. "They want their little space of ground and three head of cattle."
Sometime it's 300 head of cattle. Whether big or small operations, buyers are coming in to scoop up rural properties and drive up farmland values.
Oklahoma's farm real estate was valued at an average of $1,080 per acre in 2007, an 11.3 percent rise over the previous year, according to federal statistics. Nationwide, the average farm acre fetched $2,160, a record high and up 13.7 percent over 2006.
John
Poindexter is president and CEO at Farm Credit Services of East Central Oklahoma, which handles farm and ranch loans for 51 counties. He sees rural property as a safe vehicle that typically stands the test of time.
"I think land has always tended to be a place for people to invest in," Poindexter said. "With a 401K (retirement fund) you can see the number, but you can't touch and feel it.
"At least with real estate you can touch it and feel it."
This touchy-feely thing is also true with buying a house or land in the city, but the subprime crisis and foreclosures have damaged new and urban markets. How has rural real estate bucked the trend?
With horses and cows, of course. These buyers often can afford big spreads and want to take advantage of cheaper land available in the country, but more than anything they just want to have a hobby farm or a few animals to raise.
"I sell someone's dream," Miller said. "It's someone's dream to own a cattle ranch. It's someone's dream to own a horse farm."
Oklahoma farmland also has become an attractive target for out-of-state buyers. The per-acre price is still low relatively to almost all of Oklahoma's neighboring states.
In fact, Miller and Poindexter don't see too many farmers buying up adjacent properties anymore.
"There's still a lot of activity out there, but the majority of buyers are not the local farmers," Poindexter noted. "It tends to be someone from an urban setting or from out of state.
"They may not move here, but they are purchasing real estate."
This interstate influence is driving up values beyond anything seen in recent history. Miller remembered one auction in which a buyer paid more than $5,000 per acre for land just north of Beggs.
Now that's an auction, he cautioned, where the bidding sometimes gets, shall we say, competitive. Yet the example highlights the point that some buyers will pay whatever they want for the rural land they desire.
"They're very specific buyers," Miller said.
Farmland is so popular that Miller receives a list of about 300 qualified and interested buyers on a weekly basis. Many of them, he acknowledged, are lured to Oklahoma by the relatively low per-acre costs.
Some are gaining land to tap into intensified oil and gas exploration, Poindexter said.
Others are apparently digging in for the long haul in a struggling national economy.
"It's a good investment," Miller added. "Land has not historically done anything but improved."
Yet Realtors are quick to worry that what goes up can always go down. Not even farms are exceptions to that rule.
"I guarantee you that it doesn't always go up," Poindexter said. "I was around in the '80s when it went down."
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