A Methodology for Predicting U.S. Farm Real Estate Price Variation

LAND PRICES as an average for the United States have increased over 100 percent since 1950. Meanwhile prices received for commodities sold by farmers have declined 8 percent and net farm income has remained nearly stable. This paper contains an econometric model which can be used to trace the sources of land price increments over a period of time. By imputing the price increments (for example since 1950) to reasonably stable factors such as scale economies or to unstable factors such as speculation, the model can help to answer the question Are land prices too high? The land model is estimated by ordinary, recursive, and autoregressive least squares. The equations are estimated with annual national time series for 1923-1963, but the results are directed primarily toward analysis of the land price rise since 1950.