The Era of Turning Farm Land into Housing Developments May Be Over

Another Change in the American Economy;  The New Reality is Now

For many years cities and suburbs and even small towns have expanded by developers purchasing farm land and subdividing it and building houses for America’s growing legion of homeowners.  That legion may now be just a foreign legion, because the domestic legion of homeowners is not growing.  And the results for farmland are the reversal of the trend.

Five years into a brutal national housing downturn, raw land destined for residential development has fallen so far in value that thousands of acres across the country are being used again for agriculture.

That’s right, farmland has risen in value and land for housing developments has fallen in value, so much so that the economics of land ownership is now shifting to where land held for development is being sold to be returned to agricultural uses.  Here is one example of some startling economics.

In September, the Vanderweys, an Arizona dairy farming family, paid $8 million for a 760-acre alfalfa and cotton field that had fallen into foreclosure in Buckeye, Ariz., about 30 miles west of Phoenix. That same parcel, called Liberty Farm, had been sold to real-estate speculators in 2005 for $40.8 million. The Vanderweys want to plant hay.

And there is this

Consider the England family, which recently repurchased 430 acres of cotton fields in Eloy, Ariz. In 2004, the Englands had paid $731,000 for the parcel about 65 miles southeast of Phoenix. The family then flipped the property in 2009 to a Milwaukee-based apartment builder for $8.6 million. Two months ago, the family, which had been leasing the land to grow cotton, bought back the farm out of foreclosure for $1.75 million.

So if The Dismal Political Economist can do the math correctly, the England family has the same land they originally bought along with about $6 million.  The DPE thinks this is great, nice going Englands.

As for the speculators and developers, anybody feel sorry for them.  No, didn’t think so.  But before anyone gets too smug, your tax dollars are probably being use to bail out the banks or financial institutions that loaned the money to the developers to do those deals.