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The Speculative Value of Farm Real Estate

Author

Listed:
  • JEFFREY R. STOKES

    (University of Northern Iowa)

  • ARTHUR T. COX

    (University of Northern Iowa)

Abstract

Farm real estate in the Midwest has increased in value at rates not seen since the 1970s. The combination of low interest rates, an increase in the domestic demand for corn for ethanol production, and higher world demand for grain in conjunction with lower stocks have all pushed grain prices higher for commodities grown on farmland. A question that naturally arises is whether or not there is speculation in farm real estate and if so, to what extent speculation has contributed to the increase in farmland values? In this paper, a simple dynamic and stochastic farmland valuation model is developed. Calibrating the model to current economic conditions for corn grown on high quality Iowa farmland suggests that there is a modest speculative component in current farmland value, but higher corn prices would be necessary for speculation to be a significant component of total value.

Suggested Citation

  • Jeffrey R. Stokes & Arthur T. Cox, 2014. "The Speculative Value of Farm Real Estate," Journal of Real Estate Research, American Real Estate Society, vol. 36(2), pages 169-186.
    • Handle: RePEc:jre:issued:v:36:n:2:2014:p:169-186
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    Citations

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    Cited by:

    1. Vasco Capela Tavares & Fernando Tavares & Eulália Santos, 2022. "The Value of Farmland and Its Determinants—The Current State of the Art," Land, MDPI, vol. 11(11), pages 1-14, October.
    2. Huijian Dong & Xiaomin Guo, 2020. "Population, Income, and Farmland Pricing in an Open Economy," IJFS, MDPI, vol. 8(4), pages 1-18, October.
    3. Brett Olsen & Jeffrey Stokes, 2015. "Is Farm Real Estate The Next Bubble?," The Journal of Real Estate Finance and Economics, Springer, vol. 50(3), pages 355-376, April.

    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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