Similar to the record run in stocks, brought on in part by an improvement in the U.S. economy and the federal monetary policy, real estate values continued to see positive momentum through 2014. Many investors say the Federal Reserve’s actions helped the economy by keeping interest rates low and making stocks look more attractive compared to other investments. The combination of elevated farm incomes and low interest rates facilitated by the Fed’s actions continued to make real estate an appealing investment alternative throughout 2014.
Nationally, the increasing trend in cropland values is generally expected to subside. Interest rates have remained near historically low levels as anemic employment conditions through 2014 continue to hamper the Federal Reserve’s ability to move rates.
While well below the historic levels reached in 2013, at more than $113 billion the 2014 net farm income forecast remains the previous 10-year average. Declining corn and grain prices equate to lower feed cost and increase profitability for cattle producers. Nationally, cattle numbers have declined steadily over the past several years with U.S. cattle inventory reaching historically low levels 2013.
The combination of economic conditions and elevated cattle prices has pulled on an already tight supply of quality ranches in 2014. Demand from recreational investors has remained steady adding to demand for productive ranch properties. Increased earnings, in some cases, will make owners reluctant to sell, creating additional supply constraints. The combination of these factors points toward upward pressure on real estate values in the foreseeable future.