Since 2000, U.S. farmland values are up 58% on an inflation adjusted basis…The surging farmland values caught the attention of FDIC chair Sheila Bair. She said farmland could be the next asset bubble at risk of bursting.
Her revelation isn’t surprising given the impressive gains and the recent history in the residential and commercial real estate markets. But I think she missed the mark on this one.
I believe farmland is the ideal diversification asset for investors.
Simply put, it’s a better hedge against inflation than gold. It generates more income than government bonds. And if the “you-know-what” really hits the fan, you can still live off the land.
But doomsday theories aside, farmland is still a very attractive investment.
Remember, price appreciation is just gravy. Farmland’s real value comes from the steady flow of income it generates. Owners easily earn around 4% annually by renting the land.
4% isn’t huge but it still knocks the socks off what you’ll get from a bank CD or government bond. And price appreciation will protect your investment when inflation rears its ugly head.
But the fact remains… price appreciation has outpaced inflation by 58% since 2000. Does it mean farmland prices are getting bubbly? Not by a long shot! (more)
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