From the Palm Beach Post-Times, Oct.1, 1944
Take it easy, experts warn as farmland boom speeds up
America’s back-to-the-farm migration is in full swing: the U.S. Department of Agriculture says more people are buying farms all over the United States than ever before.
To O.C. Samuel, secretary-treasurer of the National Farm Loan Associations, it seems that everybody has the urge to own a little grey home in the West.
Hundreds of calls reach him every month. Soldiers want to buy farms with money they anticipate the government will pay or loan them after the war. War workers want to invest their savings in farm property where they can live after the war.
Real estate dealers tell the same story. There is a heavy demand for small places such as suburban property and summer vacation spots. But dozens of the West’s greatest properties, involving tens of thousands of acres of land, have changed hands.
It’s a seller’s market. One appraiser estimates land prices in the Midwest and West are up as much as 300 percent over pre-war and depression levels. On the basis of a “1914-1919 normal price,” the value of irrigated lands is up 25 percent and of dry lands 100 percent in many regions.
The Department of Agriculture is concerned that the buying trend may start a full-blown land boom and has issued a circular advising people to consider carefully their urge to get back to the soil. They also are advised to “Remember the Thirties” when farm foreclosures reached their peak in the United States partially as a result of the land boom of the First World War.
“Nobody knows what’s going to happen after this war, but the stage is all set for the same sort of thing that happened after World War I,” said Samuel. “What we want to avert is the disaster that has come when people buy land on the basis of high prices for farm products and then are unable to pay off the mortgage when pieces decline.”
Department of Agriculture statistics show that prices of farm products have declined after virtually every war and most notably the War of 1811; the Civil War and World War I.
“Part of the reason for today’s high prices is a demand for food and fiber greater than ever before,” say department experts.
“With the coming of peace, our armed forces will require less farm products. Soon battle-torn nations will begin producing again. There is every reason to believe, also, that the other large agricultural nations will increase their marketing of farm products.”
For these reasons, prices may decline. People buying land at today’s prices may be unable to pay off the mortgage with their reduced income.
In buying land today, the Department of Agriculture urges people to estimate their ability to pay for it on a normal price for farm products and not on inflated prices. Its experts recommend these steps for purchasers:
First, learn how much farms of the kind you seek were selling for in the years 1937-1940. The price asked for in 1944 will probably be much higher; so estimate whether you are likely to get back all of this “premium” price while the value of the things you can raise on the farm is still above normal. People who pay premium prices near the close of wars usually lose, say the agricultural experts.
Careful purchasers also estimate, as accurately as possible, the output of the land they contemplate buying. How many livestock will it produce each year? How many chickens and eggs? How much milk? How much butter? And so down the list of every possibility. This is the income from which the bills will be paid.
Then add the cost of operating the place. How much for labor? How much for seed, fertilizer, insecticides, etc.” How much for water? How much will the family need?
Subtract the costs from the income and the remainder is what may be available to pay off the mortgage in “normal” times.
Experts advise conservatism in estimates: in other words place lower values on the prices of farm products than actually may be received. Increase the estimates of the costs of operating just a bit more than probably will be the case. This allows the purchaser a margin of safety.
“If you want to be happy down on the farm, you have to mix business with sentiment,” said Samuel. “Never let your sentimental urge to dig in the soil rise above your best business judgment unless you are prepared to pay for the fun.”