Tuesday, September 26, 2006

Why Buy Farmland?

I was in Jacksonville, FL for the New Horizons Summit of AgFirst Farm Credit Bank, a $25 billion asset institution which is the main lending source for rural areas in 15 southeastern states and Puerto Rico. They have recently expanded into “Mission Related” investments, which are infrastructure investments for rural areas and are expanding their loans for recreational land.

I related to them in my talk that I am amazed at the growth in demand for recreational land, especially from the baby boomer generation. I’ve seen it first hand out on the road in my talks around the USA and also in a number of research studies.

One of those sources, which is an excellent resource for information and data on rural America is the Federal Reserve Bank of Kansas City. We eagerly await their monthly newsletter, The Main Street Economist, and other publications.

A recent survey by the organization on why people purchased farmland was revealing to me. For the first time in probably the history of mankind, the response “for recreational purposes” outweighed “for investment purposes”. And, the recreational response has almost doubled since the 2002 survey!

The survey results were not surprising to me. I’ve been noting and chronicling the impact of the demand for recreational ground around the country, starting to find pockets where recreational land (we would have called it wasteland 15 years ago) is worth more per acre than the best local farmland. Initially, the farmer in me refused to believe it, but I’ve become convinced that this is a trend that will only grow in importance.

With 72 million baby boomers nearing retirement age and in many cases on the verge of inheriting unprecedented wealth from their frugal, depression era parents the demand for recreational land is going to skyrocket. If the property also has water access or a view it will multiply many times in value.

As an example, the USA has 750 million acres of forestland. Every 1% of the baby boomers, who buy 100 acres of land for a house, cabin or hunting/fishing get-away, would take up 10% of that land! I’m not sure what percentage will buy that 100 acres, but a very small percentage could have a huge impact.

Are you in a position to take advantage of this demographic change occurring?


Anonymous said...

Does this trend have anything to do with the new taxation of timberland?

BoomtownUSA said...

I don't believe that most of the people who are buying land for recreational purposes are focused much upon the taxation aspects. I think that they are looking for a place to "get away".