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Predicting The Future

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justinschroeder

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Have a client that contacted me with a request to appraise a small acreage for him, easy. Then he asked if I could project the value in 50 years...After sitting in silence for a moment I thought... I guess I could look back 50 years and project a similar pattern for the future. Obviously no one can predict the future but this seems like the most logical. Acreage increased 856% since 1975, so an increase of 856% to 2070 isn't out of the question. Any thoughts on this? Or is my way of thinking logical. Funny thing is the guy wont be alive in 50 years unless cyborgs become a thing.
 

hastalavista

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If my math is correct, that is a 17% annual appreciation. That doesn't appear reasonably sustainable to me.

I'd take a longer historic view and go back further in time. You may have caught a low point (in 1975) and a current high point.
 

RebelNYC

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If you want to be really smart about appraisal, you have to understand how real estate has functioned within the context of the global economy and particularly since the Nixon Shock when the Bretton Woods System was abandoned. We are returning to a new kind of Bretton Woods.

The policy since the Nixon Shock has been to flood the world with USD in order to homogenize the global financial system, which previously did not work in the early post-war era. In part, it was technical - we did not have the technological means to implement what Keynes proposed at the first United Nations conference. It was also political - the Communist Bloc was an obvious problem. The Islamic world also was a problem as, contrary to much misinformation about the religion, God makes few direct commandments. But one is that usury is forbidden. Previously, the world took a philosophical opposition to usury in that in exponential growth is inherently unnatural. So, we had the Cold War and the various squabbles in the Middle East. You will note that Richard Nixon opened up China just months after abandoning the Bretton Woods exchange rates, so the economic relationship between "The West" and China has always been quite tight for the past half century.

Regardless, with respect to real estate this means quite a bit:

1) The USD is going to decline in value, rather quickly. Probably by about 25% over thenext 5 years. At most 10 years.
2) There will be no need for foreign holders of dollars to use commercial real estate as a kind of swiss bank account.
3) Industrial production will necessarily increase as importing most goods will become cost prohibitive.
4) We have not expanded domestic infrastructure to accommodate large scale increases in industrial production.
5) Urban areas with existing infrastructure will likely thrive in the short term. For much of the west, it will be many years before infrastructure is in place to handle a new industrial base.
6) Suburbia, as we know it, will be coming to an end. Fuel and automobiles and infrastructure will no longer be economically viable.
7) Cities in general will thrive as a result, with much variation of course.
8) Major cities that have been havens for international finance capital, like New York and San Francisco will likely continue to thrive, but not to the same extent of the past 20 years.
9) Secondary cities will see improvement.
10) Farmland will continue to be the best commercial real estate asset as imports will once again become unaffordable for the masses.

So, 50 acres. Where is it? If it falls within these constraints, you can make very informed opinions.
 

Howard Klahr

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Any thoughts on this? Or is my way of thinking logical
This is a completely unsupportable approach. Past performance is not an indication for the future. Rather examine the market analysis process as outlined by Stephen F. Fanning, MAI
 

Gobears81

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What type of land is being appraised?
 

Terrel L. Shields

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https://smartasset.com/investing/inflation-calculator

You can project inflation 40 with chart above. But can you project the change in land use? 50 years ago, I could buy a lot in Bella Vista Village for $600. Today a membership lot rarely costs more than $1,000. Good buildable lot, maybe $6500. In Fairfield Bay, might get your money back if you bought in 1967, ditto Posey Mtn., or Flint Ridge. Meanwhile, you could buy lakeside lots on Beaver Lake for $900, circa 1967. Today, $60,000 would be a bargain.

Agri land? Transition value issue. Pretty much a scenario and dartboard exercise.
 

justinschroeder

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Illinois
George - Obviously things can happen... disclaimer, the appraiser cannot predict the future, however based on the past...

Denis - Who would of though an acre purchased in 1975 for $1,200 would be worth $10,000 in 2017.

Going back 100 years acreage has increased 5,952%.

Trends show an increase to a high in 1920, low 1933; increase to a high in 1981, low 1987; high in 2014 and in a current decline.

Gregb - population growth or lack of it has followed a similar roller coaster. The decline is due to Chicago. Most mid-western states have lost population to the "sunny" states. Similar to the flow from rural living to city living and back to rural living goes the population will likely increase again with changes in time.
 

justinschroeder

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Illinois
Gobears - The land is agricultural.

Terrel - The land is in a small community. I don't see development in the near future and most likely would not attract development into the extended. Though again I cannot predict the future and would have to place a disclaimer.
 
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