A recent Wall Street Journal front-page article titled “U.S. Farmers Reclaim Land From Developers,” discussed the conversion of land sold in the past five to seven years for new residential development, back into active farm production.
This conversion represents an additional means of reducing the over supply of residential land. The current over supply of vacant residential land and, more specifically, land developed with residential infrastructure (streets, sewer, water), is one of the factors that will keep downward pressure on home values. (Such land is jokingly called a “pipe farm” due to the standing sewer pipe connections, which are a symbol of failed developments.)
As long as developers can acquire new lots at “re-set” prices, they will be able to deliver new homes at prices below the true cost of production and sell homes below the cost of their intrinsic value. Seeing the land absorbed for other uses is a positive step in the recovery process as it limits the future supply of cheap land.
Photo Credit: Gobinath Mallaiyan (Flickr)