Age demographics and farm real estate values
Over the past half century, demographic changes have shaped the U.S. and global economies. The baby boomer generation is transitioning from middle age adults into retirement age while the millennial generation is beginning to join the work force as young adults. Therefore, based on the life cycle theory, significant changes in consumption and investment patterns have and will continue to be prominent forces within the economy. Simultaneously, farmland values have seen record high values in the past decade increasing consideration to the impact of the age demographic shifts in the U.S. population on farmland values. An empirical model using the hedonic pricing method is developed to explore the relationship between farmland value and age cohorts within the total population. This study expands current models by investigating how shifting age demographics correlate with farmland values. In an attempt to distinguish whether a higher concentration of the population in any age group is correlated with farmland values, the model uses Midwest, county level data between 1974 and 2012. The results support two hypotheses. First, counties with a higher concentration of middle aged, 45 to 64 year olds, will have higher farmland values due to their increased demand for farmland as investment. Second, counties with a higher percentage of population in the retirement life stage from ages 65 to 84 experience lower farmland values as this age group tends to sell farmland for retirement spending thus increasing supply. However, the results cannot definitively support nor contradict the hypothesis that an increased proportion of 25 to 44 year olds would result in a positive impact on farmland values due to their demand for residential markets. An additional finding indicated that a higher concentration of residents 85 years or older had a positive impact on farmland values in years of peak farm real estate value.
Henderson, Purdue University.
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