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Abstract
This article discusses asset bubbles,
the Kansas and Illinois land
markets, estimates land values, and
develops a land price/earnings
ratio. Current land sales data are
also examined. Finally, we examine
relationships between land values
and interest rates, inflation rates,
and cash rents. Results show that
real land values increase
substantially when inflation
increases. Recent land values are
explored for both Kansas and
Illinois with somewhat differing
results. Development of land price
bubbles could be enhanced if
inflation becomes more widespread
and land values are viewed as
having good protection from
inflation. Market fundamentals
would suggest that an increase in
land prices due to inflation occurs
because of an increase in cash
rental rates and not through a
dramatic change in the price
earnings ratio.