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Corn+Soybean Digest

Views from the Road on Real Estate

Wow, this has been a hectic summer of travel, seminars and schools. I thought I would summarize some of the perspectives and observations from this past summer’s road tour.

“When You’re Hot, You’re Hot,” when you are not, your not!
The old Jerry Reed song sizes up the current real estate market. Real estate is hot in the Midwest but extremely soft in many parts of the east and west coast. Many are talking about land values in Illinois and Iowa being $10,000/acre by 2010. In Florida and many areas of California and my home state of Virginia, for sale signs are being planted faster than a spring crop, but with few takers. There appears to be a flight from real estate and the stock market to financial liquidity in the forms of money markets and certificates of deposits. Will my travels in 2010 in the Midwest find the same for sale signs at discounted prices? Only time will tell.

Flippers are now the Flops
On a recent airliner trip, I met a man from California who was doing real estate flipping. He was buying homes and real estate for speculation for the quick buck. He currently has seven properties priced at over $700,000 each with no rental income and no prospects for buyers. He says he is lucky because he has cash revenue, which will last another two years. His sons followed in dad’s footsteps with 15 properties. They are not so lucky. The two boys are selling their properties at 80¢ on a dollar to raise cash to make payments. The lesson here is that the boys need to hold a little cash reserves and liquidity to ride out the down cycle.

The Feds are Coming!
All lending institutions will be scrutinized concerning lending practices. This winter during renewal season, expect to be asked for more financial documentation and records. Cash flow and profits will be watched closely.

Air Travel and Its Headaches
Air travel is designed so that you can’t move freely around the country. My travel log has found that 45% of my flights are late by at least 30 minutes or more, or even cancelled. Every politician needs to travel commercially for two months and get his or her priorities straight. Traveling whether by train, plane or automobile is a wreck!

Editor’s note: Dave Kohl, The Corn And Soybean Digest Trends Editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at [email protected].
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