by Daisy Luther, The Organic Prepper:
We all know something’s rotten in real estate. Even people paying no attention to markets notice how dramatically rent and property values have risen. In my area, property values have quintupled in the last ten years. What bought a house on acreage ten years ago now wouldn’t get you a small house on a tiny lot in a terrifying neighborhood.
It’s not that tons of people are moving to my state. Nearly as many are leaving. It’s also not that there is a building shortage. Enormous housing subdivisions are going up, but they’re full of $500,000 homes in an area where the median income is $80,000. It just doesn’t make sense.
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Investment firms are snapping up homes.
That is, unless you’re looking at homes not as a place for real people to inhabit but as investment opportunities. Sellers are usually happy to sell to investment firms because they can pay so much more than average individual buyers, but that’s because investment firms have access to much lower interest rates.
While investors dramatically slowed down their purchases of single-family homes in 2023 due to the mortgage rate increases, they still purchased about 18% of homes sold because individuals have slowed down their purchases of homes, too.
Everyone knows that the luxury home bubble is going to burst at some point, and investment firms are backing off accordingly. This year they have shifted their focus to low-income homes, buying up an increasingly large share of starter homes around the country. Investment firms see these as safer bets financially, but this concentration of cheaper homes into the hands of investment firms makes it harder than ever for lower earners to buy their own homes.
Rural land is being artificially inflated by investors too.
Some young people have been thinking, well, maybe I’ll just move to the country, buy some cheap acreage, and do the homesteading thing. But farmland prices have been artificially inflated, too.
Now, I know for a fact that many investors simply look at aerial photography, pick out pieces they think look interesting, and then start making offers. I know because I live on an interesting-looking piece of property, and I have been contacted by investors who know absolutely nothing about the zoning laws or long-term plans in my area.
They do similar things with farmland, except that misreading aerial photography with farmland can have much bigger consequences in terms of price. Looking at the 2023 Nebraska Farm Real Estate Report, you can see that, for the Southwest portion of the state, center-pivot irrigated cropland is worth $5495 per acre, whereas dryland cropland with irrigation potential goes for $2080 per acre, less than half the price. And I’m using Southwest Nebraska as an example, but land all over the drier parts of the High Plains shows a large price disparity between irrigated and non-irrigated cropland.
If investors see the hardware in aerial photography, they sometimes assume it’s irrigated and pay irrigated prices. Of course, anyone that actually wanted to farm would confirm that before making any kind of commitment, but many investors don’t because they really don’t care. It’s not about farming the land at all. It’s about simply having assets, and if they artificially drive up prices, so much the better for their balance sheets.
But so much worse for neighbors that now have artificially inflated land prices because those mean higher taxes. And so much the worse for any young people with limited capital that may have actually wanted to farm.
And a lot of the investors are foreign.
And it just keeps getting weirder when foreign investors get involved. While it’s well known that Bill Gates is the largest individual landowner in the U.S., he’s hardly the only non-farmer buying farmland.
There has been a great deal of talk about the Chinese buying up farmland. While they only own about 1% of American farmland, it’s still a matter of concern in that they seem to be most interested in farmland near military bases.
Last summer, a Chinese group bought 300 acres of farmland in North Dakota, about twenty minutes from an Air Force base. More recently, an entity called the Flannery Group spent $800 million buying farmland adjacent to Travis Air Force Base in California, then sued the farmers, which the farmers and local politicians are considering an intimidation tactic.
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