Tag Archives: Chicago Fed

Farmland Prices and Suburbia

Rick Harrison at Newgeography.com has an article on the relationship between rising farmland prices and the construction of new suburbs. He looks at the Minneapolis-St. Paul region:

As the tiny towns outside the Urban Boundary attracted more development, they also attracted the national developers. All of the nation’s Top Ten Home Builders discovered this region. Each year 25,000 or so new homes were built and quickly sold to suburbanites who preferred a 30 to 40 mile commute over living near the city core….

Much of the escalation in home pricing was due to a bidding war over developable farmland. National builders, using their Wall Street dollars, competed for desirable acreage. If Farmer Fred was able to sell his property for $50,000 an acre, when Roy next door put his farm up, the starting price was $50,000 and the final fee was likely to be $60,000, the starting point of the next site for sale. By 2005 the outer small town land that could have been bought for $12,000 an acre a decade earlier was worth more than 10 times that amount.

Last month the Wall Street Journal reported a steep decline in farm prices. Data from the Chicago Fed are available here. In  much more land-constrained Britain, prices have dropped as well.