Land Booms, Bubbles and Busts: Some Beginning Year 2013 Reflections

Authors

• Bruce B. Johnson, University of Nebraska-LincolnFollow

Date of this Version

1-16-2013

Document Type

Newsletter Issue

Citation

Cornhusker Economics (January 16, 2013)

Comments

Published by University of Nebraska–Lincoln Extension, Institute of Agriculture & Natural Resources, Department of Agricultural Economics. Copyright © [2013] Board of Regents, University of Nebraska. http://agecon.unl.edu/cornhuskereconomics

Abstract

One lesson to be learned from economic history is this: real estate booms, create bubbles, which lead to real estate busts. Having studied the agricultural land markets in Nebraska for nearly 40 years, I’ve witnessed the complete cycle: from the 1970’s boom through the 1980’s bust, and the subsequent economic toll of foreclosures and asset devaluation which lingered across the agricultural landscape for more than a decade. To be sure, individuals, families and the business community learned hard lessons from the experience. Vowing to not fall into that trap again, market participants and financial institutions generally embraced a more conservative real estate investment strategy. Expected income earnings, with a good measure of risk management factored into bid levels led to a more deliberate land market pattern for a number of years. In fact, up until just five or six years ago, the market for agricultural land was generally moving on a gradually upward trajectory that was reflective of historical income levels and fairly conservative expectations.