The indications from the housing sector are not encouraging. Some even compare the problems to the technology bubble bursting in 2000 (mere days after I invested in a tech fund):
I do not dismiss lightly the pain being felt in the home-building sector, but there may be an opportunity for farmers hidden here as well. As development slows to work through a large inventory of unsold new homes and the sub-prime lending problem, 1031 money slows as well. It may take some time for it to restart as well.
The other reason it's so hard to call a bottom has to with how bubbles burst. After investors and corporations overreact on the upside, they overreact on the downside. As a result, it generally takes more than a few quarters for equilibrium to return to turbulent markets. For example, lenders are just now starting to tighten standards on the loans they make to subprime borrowers—a measure that is sure to weigh further on an important sector of the housing market.
All of which means that the housing industry in 2007 may be where technology was in early 2001—engaged in the first serious hard times the industry had seen in more than a decade, finally aware of the problem, but still a long way from the bottom. [More]
That sources of funds for land ownership competition may be diminishing therefore, just when farmers will be enjoying significantly higher returns. I still think land prices will jump this year and especially in 2008, but producers may have a window of lessened competition.
Not everyone agrees, of course, with my devotion to owning (nearby) ground. Maximizing returns could point to another asset or investment choice. While this is valid, no other asset will protect your career, which I feel is more fragile than ever.
We don't need many farmers, and the line to join up is very long. Land ownership brings the absolute power to decide who farms those acres - a right of great value. I'll be writing about this in Top Producer later this year, but of all the threats facing grain producers, a sharply lower need for people is Number One in my book.