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Bubbles on the brain

Agriculture.com Staff 09/06/2007 @ 10:30am

Anyone else getting tired of all the talk about the housing bubble?

It seems every day in the newspaper and all over the Web I read again and again and again about how the bubble is bursting or has burst. Bubble, bubble, bubble. The hand wringing is endless, isn't it? Believe me, I understand the significance of one of the aftershocks of the housing bubble bursting, that being the credit crunch. Lenders are pulling in the strings it seems.

But all the yammering about how housing values are falling makes me ill. Folks talk as if falling values are against the rules. How can this be?

It's really not so hard to understand. Credit has been easy and cheap. Speculators drove the market. Buy, hold, maybe fix up, sell. Rake it in, right? Not any more. Too many homes got built, too many are now for sale, fewer folks are looking to buy. Supply and demand has flipped.

Presto, falling housing values.

Hey, it's no fun for anyone to learn their home, their car or their stock portfolio is worth less than it was. But hello, there is a reason we refer to them as the housing market, the used car market or the stock market. Markets can and do fluctuate. Up and down.

I've been tracking a specific market for nearly 18 years now, the used farm equipment market. We keep tabs on over 75 different categories of equipment, including skid steers. It's an interesting category, indeed, given the shifts in the housing market.

The bubble has burst. Builders are slowing down the pace of new construction. So if contractors are slowing down, do you think used skid steer values may be dropping too? A good question I think. It stands to reason their value may soften a bit. But how to know?

The numbers don't lie and I've got the numbers folks. But I'm here to say at this point, I don't really see used skid steer values falling at all. In fact, the opposite is true, they appear to be increasing slightly in value. Here’s an example. Back on Feb. 2, 2005 on an auction in south-central Minnesota, a 2003 NH LS180 skid steer with 340 hours in excellent condition sold for $18,750.

Now zoom ahead to July 26, 2007, on a farm auction in west-central Minnesota. A 2003 model NH LS180 with 225 hours in good condition sells for $20,500. Almost two and a half years down the road and a very similar skid steer in the same neck of the woods sells for $1,750 more.

Click here to download a PDF with expanded auction price data on New Holland LS180 skid steers.

Will they continue to climb?

It's possible a severe slow down in the construction market could act to flood the used market with available used skid steers. If that happens, values will naturally fall. Makes me think of one of my pet phrases, a saying our two daughters get tired of hearing come out of old dad's mouth. . . It is what it is.

Anyone else getting tired of all the talk about the housing bubble?

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