The Wall Street Waltz: 90 Visual Perspectives, Illustrated Lessons From Financial Cycles and Trends, Revised and Updated Edition

Chart 59

Rural Real Estate: The True Story

I remember her telling me, “Real estate could only go one way.” It was back in 1980, and everyone “knew” real estate was the one sure-shot investment. She was a financially ignorant older widow who was making a boodle buying real estate. The point, she assured me, was that “you can't lose.” My next-door neighbor accumulated millions, seemingly overnight, buying highly leveraged land.

A 19-year-old employee/laborer offered insights on where I could buy particularly choice, but undiscovered, pieces. Then he told me that Will Rogers once said, “Buy land; they ain't making any more of it.” But he offered me a still better insight. His blathering reminded me that Bernard Baruch once said, “When beggars and shoeshine boys, barbers and beauticians can tell you how to get rich, it is time to remind yourself that there is no more dangerous illusion than the belief that one can get something for nothing.”

While Will Rogers's quip may be amusing, buyers of raw land in recent years should have listened to Baruch. Before 1980 rural real estate had risen 15 percent annually for years—spurred on by strong farm-product pricing and spiraling inflation during the Nixon-Ford-Carter years. But just when the party got going good, somebody took away the punch.

This map shows the percentage change in agricultural land values for each state (and collectively for New England) for 1981–1985. As you can see, farm land values plummeted. This is a reasonable proxy ...