Thanks to the housing bust, undeveloped land in the exurbs is going back under the plow.
By Eric O’Keefe
Farmland on the fringes of major metropolitan areas that was slated for development into single-family and multifamily residential properties in recent years is now being bought out of bankruptcy for pennies on the dollar. The proud new owners? In many instances, it turns out to be the savvy farmers who previously owned the land. Buoyed by the record rise in commodity prices and farmland values, agribusiness owners have moved into the driver’s seat.
The Wall Street Journal labels this new trend “a historic shift,”one that runs counter to demographic trends that date back to the end of World War II. According to a report prepared by the Lincoln Institute of Land Policy in conjunction with the Wisconsin School of Business, residential land values in the U.S. have fallen nearly 70 percent since peaking in the second quarter of 2006. By contrast, during that same period the value of cropland in the contiguous US has risen close to 20 percent, according to the Department of Agriculture.
The Journal cited several eye-openers in and around metropolitan Phoenix, a once-booming market that has become a poster child for the implosion of residential home values since the onset of the Great Recession. One hour south of the city in Eloy, the England family paid $731,000 to buy 430 acres of cotton fields in 2004. Five years later, they sold the entire parcel to a Milwaukee-based apartment builder for $8.6 million. The Englands just reacquired the same farm out of foreclosure for $1.75 million.
Some 30 miles west of Phoenix, the Vanderwey family runs 4,800 cows at their Grand View Dairy. The Vanderweys recently acquired a 760-acre tract in Buckeye called Liberty Farm. Once used to grow alfalfa and cotton, Liberty Farm was sold to real estate speculators for $40.8 million in 2005. The family recently bought it out of foreclosure for $8 million.
“These prices are becoming new normal,” Nick Vanderwey told the Journal.