Financing for many types of properties — some farms, second homes, undeveloped land, timberland and recreational property, among others — is either hard to get or only available on out-of-whack terms. Credit is not fully stoppered, but it sure is clogged.

I asked two dozen readers of Country Real Estate to give me their impressions of how such properties were moving in their areas compared with two years ago. The group included real-estate brokers, financial advisers, consulting foresters, investment managers, lenders and individual investors.

This is not a rigorous, scientifically valid opinion survey. I am not a rigorous, scientifically valid kind of guy.

Future-spook. Most buyers, it appears, are scared of the big stuff—the five-to-10- year prospects for the economy, consequences of federal bailouts and borrowing on inflation and taxes, increasing cost of middle-class life and a feeling that a lot of what used to be fairly predictable is now fairly chancy.

“From my perspective,” wrote Tom Brickman, head of Southern Rural Land Sales in Alabama, “the main factor affecting the rural land business is uncertainty from many points of view—interest rates, taxes, employment, expanding role of federal government. Buyers AND sellers are both ‘sitting on their hands waiting for someone to blink.’”

Two types of land buyers have disappeared. Both buy-and-flip purchasers and developers (who buy large at wholesale, and sell divided at retail) are now sitting high in the stands, far behind the sidelines. Investments are no longer being made on assumed rates of steady appreciation. Speculative buying is a memory.

Sales have fallen; some prices have, some have not. Visit the website of almost any broker who works with country property and you will find a large inventory in most property categories. Some listings have been hanging around for two years, or more, for lack of price reduction or lack of able buyers.

Most readers report that land tracts are not moving, or moving slowly. One broker said: “People with money are waiting; people with land don’t want to sell at this time. It’s as if everyone is waiting to see what will happen next.” Another broker reported that his 2008 sales were half 2007’s, and the average per-acre price for land and farms had dropped more than $550 to $2,220.

Sellers who can wait for their price…have been—almost everywhere. Perhaps that reflects confidence in a future rebound. Or maybe it represents a calculation that taking a bath now is more painful than hoping for something “to turn up,” like Mr. Micawber in David Copperfield.

These “waiters” rely on other assets and income to muddle them through the economic pinch that’s touched everyone, everywhere.

My general impression is that most sellers are trying to stick to 2007-type prices if their circumstances permit. Distressed sellers are coming off a 2007-type price by 10 to 30 percent as a group, but in individual cases by 50 percent.

And yet, I ran into sellers in New York and West Virginia last month who believe that their undeveloped properties have appreciated 30 to 60 percent since 2005. When asked on what basis, say, a $100,000 tract back then is now priced at $150,000, the best answer I got was, “just because.” I was not persuaded.

Ed Hicks, a North Carolina broker and forester with United Country—Timberland Investment Properties who handles recreational and timber tracts from Tennessee to Florida, says that he’s seen “true timberland investment tracts drop to $800-$1,500/acre from highs in the $3,000-$6,000 range in south Georgia, north Florida and rural South Carolina.” These highs were speculative prices with no support from actual timber values, he added. “Prices of recreational tracts have fallen, but, more importantly, sales have fallen. Banks aren’t excited about lending for land purchases.”

But Stephan Tomlinson of Alabama’s Natural Resources Group found that prices for recreational properties have stayed relatively steady, though buyers want smaller tracts. “Same buyers, smaller budget,” he wrote. He’s also starting to see land liquidations by Real Estate Investment Trusts (REITs) and Timber Investment Management Organizations (TIMOs).

Some sources reported that sales of large timberland tracts are off in number and price, but J. Brian Fiacco at Timberland Strategies, LLC, who tracks large institutional and industrial sales says that such transactions “…still have not seen the major declines that have been so widely reported.” His guess: “perhaps a 10 percent [sales] decline from the very peak.”

Sales and prices of productive cropland seem to be holding their own in the Midwest, despite a drop in agricultural income. Such land should pay for itself over time and has been seen as a hedge against inflation.

The sales-and-price story is grimmest with rural second-home developments and vacation-home projects in traditional destinations like Orlando. Those situations favor buyers.

Price is now the make-or-break factor with most properties in most areas with cash buyers. With credit buyers, it’s both price and financing.

Money is and is not around. The big national and regional banks are not willing lenders for many types of country properties. If they can sell the note, they might make the loan, but they are not making it easy for borrowers interested in something other than a single-family, primary residence.

Bob Turner, a Memphis-area broker at Southern Properties, said that “the main problem with subdivision development lots.., farms and commercial developments…is financing. The world of financing took the United States from a credit-based economy to a cash-based economy in a matter of months, and it will take years for everyone to build up the cash to be able to put the money down required by the banks.”

Stephen Dorris, an investor and forester in West Tennessee, agreed: “Money is hard to come by as banks do not want to lend unless the buyer can prove he or she really does not need the loan and that he can show repayment on paper. Cash flow is king now.” A real-estate lawyer in upstate New York and brokers in Michigan, Virginia and Illinois agree: the problem is financing.

Observers have different takes on the Farm Credit System, a national network of cooperatives that makes a large portion of all loans in rural areas. FCS rates tend to be higher than others.

Farm Credit offered someone I know well (794 credit score) a 7.675 percent fixed/30y refinance rate last week on a three-property package (house/farm, timberland and business office). This translates to 6.908 percent, assuming a 10-percent dividend on the required stock purchase. The borrower’s collateral was valued at almost three times the loan’s principal and almost twice the tax-assessed value. The borrower has not missed a mortgage payment since moving to the house/farm 26 years ago.

Washington might consider measures that buy down FCS interest rates to get this major rural lender back in the game.

Lenders are requiring between 20 to 50 percent in down payment on bare-land loans, coupled with comparatively high interest rates, adjustable rate mortgages (ARMs) and short terms. One broker who wanted anonymity worried that the “…land banks and farm credit coops are instituting ARMs, which, of course, were one of the major factors in the residential crisis.”

I see no defensible reason for loading land loans with this baggage where borrowers present a reasonable plan for the property, qualify for a loan and present sufficient collateral and cash flow.

Since sale of property is a major economic engine in all of our 2,000-plus non-metropolitan counties, these areas would benefit by getting mortgage money out the door, not just into the lender’s hands. Washington might consider the following ideas to get rural credit unstuck:

Encourage/require/reward lenders for holding mortgage notes in their own pockets. This produces quality lending. It’s the opposite of the subprime-derivative explosive device that burned us last year and scorches us still.

Encourage/reward lenders who make (not just offer) long-term, fixed-rate mortgages (FRMs). Most borrowers pay these off short of the full term, which means that the lender’s front-loading of interest produces a much higher actual interest rate (profit) than the advertised APR. Given the near-inevitability of inflation, FRMs help borrowers build wealth. ARMs are far riskier for individuals and the country as a whole.

Stop penalizing buyers of small tracts of rural land with inflated down-payment requirements and jacked-up interest rates. Most land loans under a couple of hundred acres to individuals (not developers) are no riskier and no less liquid than residential loans to the same individuals. The current premium charged on land loans is a form of self-interested price-fixing…in my self-interested opinion.

Spread the stimulus. If Washington is trying to goose the housing economy, why exclude sales of existing second homes and second-home bare-land sales from the incentives extended to buyers of principal residences and first-time owners?

Public option. I’ve heard a number of explanations for the lack of financing and high interest rates on rural property in the face of mortgage money at record lows. These explanations — more risky, less liquid, harder to evaluate — are either outdated or unsupported from what I can determine. The same lenders who inflated the mortgage bubble with a lot of Wall Street shake and bake are now sitting on the money that’s available to them, many like catatonic hens.

The Federal Reserve is making money available cheap, but it’s not pushing the lenders to make sensible loans on reasonable terms to responsible borrowers. One lender said that “Bush and Obama seem to have saved us so that we can thumb our noses at borrowers.”

If mortgage money costs one percent, might not a public option lend it out at four percent and make a profit? Might not this profit opportunity stimulate competition? And when the market resets, the public option could be put back in its holster.

President Obama reports that our rate of economic decline has slowed. This is better than several of the alternatives.

If he wants to crank the economic-development engine in rural America, he needs to remind lenders that they are lenders. Wasn’t that why taxpayer money was used to rescue the system? Am I forgetting something?

We’re in trouble Far and nigh.

So shut your yap and Buy, buy, buy.

Burma-Shave

Washington plans to buy improvements to various infrastructures–transportation, energy, education, health care. It is hoped that public spending will stimulate consumer buying, which will reboot the private economy and take over as the stimulus runs its course.

It is also hoped that the billions in proposed 2009 tax rebates and cuts will be spent lickety-split, not saved or used to pay debt.

This stimulus will succeed or fail to the extent that everyone starts buying stuff, preferably American-made stuff.

Just for the record–farms, recreational land, residential housing, second homes, timberland and conservation properties are as American-made as it gets.

But Americans are afraid of buying right now. Those who have lost their jobs, their savings or their homes are scared of what they see in the light, let alone what they can’t see in the dark. Everyone is pulling back, economizing, hoarding.

Buying now is too risky, we think, because we’re uncertain about our individual economic futures, because things could get worse and take a long time to come back, because something really bad might happen.

We’re too scared to buy individually, but buying collectively is the only way out.

Fear makes sense. Nothing guarantees future personal income for most individuals and families. Life, today, is more unpredictable for rich and poor alike.

And if the stimulus package doesn’t succeed — however, that might be measured — there’s no back-up plan.

Fear is useful when it stimulates prudence. It’s deadly when it leads to paralysis.

Whether we decide to buy something always involves calculations of risk. Will I have money in the future to buy X if I buy Y now? Is buying property now too risky given falling prices and sales? What are my chances of losing money on an investment?

Risk comes at a buyer like pitches from a Cooperstown lefty—different speeds, curves, sinkers, sliders, brushbacks and beanballs. Hitting for average requires swinging only at pitches well within the strike zone. They are the prudent risks.

One kind of risk is subject to rational analysis. Probabilities of certain things happening or not happening — like interest rates staying reasonably low for the next year or the need to replace a 50-year-old shingle roof whose warranty expired 35 years ago — can be estimated with current information. These risk predictions can be made on what we see and our experience.

A second type involves future events that are more uncertain. It’s easier to imagine possible events — like a house fire — than assess their probabilities.

A third type is what Nassim Nicholas Taleb, author of The Black Swan: The Impact of the Highly Improbable, calls extremely rare events that are essentially unpredictable.  Black Swans, he argues, are the unseen happenings that trip us up as well as the good fortune that occasionally shines.

Some risks can be contained, even prevented. Others are shaped, but not controlled. And a few — like getting hit on the head tomorrow by an asteroid the size of Arkansas — are just out there, and it’s a waste of good hand-wringing to worry about them.

Washington’s stimulus program is about creating economic movement that encourages a lot of us to take reasonable risks again with reasonably knowable consequences. The market has stopped doing that.

Federal money is supposed to change the prevailing psychology of fear, which stimulates hoarding, to the psychology of confidence, which stimulates buying. But confidence has to be based on genuine improvement in individual economic fundamentals—not staging and Burma-Shave ads.

No guarantee exists that the stimulus, as proposed, will stimulate either confidence or movement beyond itself.

Critics rightly point out that too much of it is too slow; that much of it is not going into job creation; that it doesn’t change the financial system that produced this mess; and that it doesn’t do something about foreclosures, which is the hole in the stimulus bucket.

Right now, fear is driving most us to choose what appears to be the least risky decisions—sit tight and wait for things to improve.

We seem to remember the buy-low/sell-high rule in good times, not in bad ones.

The buy-low time is right now when things are bad.

The buy-low stars are in alignment. Prices are off. Sales are slow. Interest rates are down. Money is available. A real-estate tax credit in some form is likely to appear. Population growth will drive up property prices long-term.

While there are always risks in investments, a disciplined buyer can understand and control the two biggest–paying too much and selling too soon.

No more.

While nobody in my county of 2,500 has a Bloomberg terminal, each of us now understands that the number of dollars we have in our wallets depends on who’s doing what around the world and for how much. National and global forces determine the price of our cattle, poultry and timber; whether tourists visit; and how much money state government gives us for education, roads and law enforcement.

Some of us support an economic stimulus package, and some don’t. But most might agree on a few ideas that would help get things moving out here almost immediately and do some public good to boot.

Fence livestock out of moving water. Livestock define bathrooms differently than most people. For this reason, they pollute rivers and streams differently than we do.

Both pasture run-off and direct deposits add nutrients that cause problems from the Chesapeake Bay to the Gulf of Mexico. Farm pollution of this type is not regulated.

The way to address this problem is to fence livestock out of running water.

This is a monumentally unpopular idea with livestock farmers, including me. “Making fence” is hard, miserable, back-spraining, expensive work. The old fence has to be dismantled and carted off. Then new posts — wood or steel — have to be driven into the ground and wire fastened from one to the next along the entire line. Tons of material have to be moved around. My rule of thumb – or what’s left of it after old barbed wire has ripped it apart — is each day of fence work is to be followed by two days of aspirin and motionless potato couching.

Since the Nation would benefit from protective fencing built to federal standards by local builders, its cost could be part of the stimulus package.

To the extent that we improve the quality of our rivers and coasts with “clean-water fencing,” we have upgraded our farm infrastructure as well as our green infrastructure.

Fence-building is done in the spring, that is, two months from now.

Plant trees. Trees control erosion and pollution, store carbon, make oxygen, provide sustainable building materials and paper products, help wildlife and are emerging as a feedstock for “treethanol,” a substitute for gasoline. Trees push money through rural economies.

Trees can be planted one by one in existing woodlands or in dedicated plantations for wood products or energy.

Technologies for converting wood into ethanol on a commercial scale are five to ten years off. Fast-growing species — like the hybrid poplar developed at the Oak Ridge National Lab — can be planted now and be ready then. The worst outcome of planting trees is good–additional forest cover, more carbon capture, more sustainable products, more money in the countryside.

Wood-based ethanol reduces greenhouse-gas emissions by 80 percent or more compared with gasoline while corn-based ethanol reduces them by only 10 to 20 percent. Further, the energy balance (energy produced in terms of energy added) for cellulosic ethanol is much higher than corn, which some even argue is a net-energy loser.

Marginal farmland and old strip mines can be used for plantations. Much of this type of land is found in poorer parts of rural America where unemployment and underemployment is chronically high.

Stimulus funding can either pay for, or cost-share, the site preparation, seedlings, planting, fencing. maintenance and tending. Landowners could be required to repay some, or all, of the get-started costs when they sell their “stimulus timber.”

Spring is a good time to plant trees, that is, two months from now.

Run the schools through much of the summer. American students do not match the scores of kids from several dozen other countries. In 2006, the U.S. was not in the top 20 nations in math, science or reading, according to results of the world-wide test given to 15 year olds every three years by the Programme for International Student Assessment.

One reason for our poor performance is that most of the higher-achieving students are in school longer than the average American school year of 180 days. The South Korean year is about 40 days longer; Japan, about 60. Might more schooling leave fewer American children behind?

Washington could include “stimulus summer schooling” for districts willing to extend the school year for six weeks to find out.

School is out in May or June, that is, about four months from now.

Fund safety improvements on rural roads. You may want country roads to take you home, but getting around out here safely is another song.

States fund road maintenance, but improving the safety of two-lane roads seems to be a low priority. On my four-mile-long road, we have five blind turns, two of which are really bad and a third routinely causes near misses as well as the occasional hit. It’s been like this since the early 1950s.

Needed improvements are small widening and straightening projects, regrading curves, painting pavement edges, guardrails and bridge work. Local excavators could do some of these jobs.

Every state has a county-by-county road-improvement plan with prioritized projects. States could administer this program and allocate funding. Everything’s in place.

“Safety stimulus projects” could start a little later in the spring, about three months from now.

Each of these ideas would pump money into different sectors of a rural county’s economy. And more than that, tangible public benefits would be gotten for the dollars given.

Here we are: Stimulate us!