Friday, December 17, 2004

Growth begets higher land prices begets more growth



Local residential development land prices have risen to a staggering $225,000 or more per undeveloped acre. This value is seen across the Stanislaus area, from Modesto to Ceres to Newman. Areas north of Modesto can go for even more. These high prices are for land that can be developed for new houses, which means that it has to be in or near a city's borders and probably has to be in a city's general plan or sphere of influence.

This is a publicly stated dollar value and has probably changed since I heard the figure this fall. Development land in some parts of the Manteca area is said to be considerably higher. Some development land in the "wrong area" or where houses will not be built for a number of years will sell for less, but still be a high price per acre and tempt any seller.

To put this value in perspective, at that price per acre, if you own 10 acres in a city's growth area, you can sell and be an instant multimillionaire and retire or go into something other than farming.

This kind of land value has all kinds of implications. First, it is a direct result of what developers can sell houses for. The higher the price they can get for new houses, the more they can pay for land and still reap huge profits.

Almost everywhere you look, you can now see small, previously undeveloped acreage being prepared for new houses. Remember that corner lot where kids used to play? It's now probably growing houses instead of weeds.

Since there is always a fear that the new housing boom will bust, as it has in the past, the high price per acre is encouraging former holdouts to sell just in case the bubble bursts. At that kind of price, who wants to wait for an extra $25,000 per acre?

The psychology behind a land sale is important.

One of the most important factors is for small farmers to sell and retire on the proceeds. Even people who built houses on what was country land near cities just a few years ago are selling and moving on with profits far beyond farmland or orchard prices.

Farmers have other reasons to sell, such as all the government regulation. If houses are already near your farm land, you have to contend with new residents' complaints over dust and noise. The high prices just makes it an easy decision to sell.

Land has always been a big factor in local politics, mostly for the worse. It's hard to tell when elected officials are making decisions based on good planning or so their land-owning constituents can make more money.

All of this constitutes growth planning by property value. Some things never change.

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