30 BULLETIN 1421, U. S. DEPARTMENT OF AGRICULTURE 
tion for the use of the latter in order to estimate the earning value 
of real estate per acre. After allowing 8 per cent for the use of 
working capaell each year there remained $26.60, $5.91, $1.83, and 
$12.40 per acre, respectively, for the use of real estate in 1919, 1920, 
1921, and 1922. 
The estimated earning values of real estate per acre, as shown in 
Table 9, equal these returns per acre capitalized at 4, 5, 6, and 7 per 
cent. Ifit is assumed that capital should earn 4 per cent, the average 
earning value of real estate per acre was $665 in 1919, $148 in 1920, 
$46 in 1921, and $310 in 1922. But if it is assumed that the capital 
should earn 7 per cent (approximately the average rate paid on 
mortgages in Twin Falls County in 1919), the average earning value 
of real estate per acre was $380, $84, $26, and $177, respectively, in 
1919, 1920, 1921, and 1922. | 
TABLE 9.—Approximate earning value of real estate per acre on general crop 
: farms, 1919-1922 
Item | 1919 1920 | 1921 | 1922 
arms studied, mim ber ae 22 eater ne a eee ee ees 190 178 | 169 67 
Dollars | Dollars | Dollars | Dollars 
Net return! to capital’ tc 2 2003 ee eee 2, 224 673 322 1, 102 
Wseiot working capital at: Sper cent =e ae eee 250 246 190 176 
INet-return-tomeal estateiz 2 2 Sach ae ee eae ee Se eee eee 1, 974 427 132 926 
Net return per acre of real estate: — ss See 26. 60 5. 91 1. 83 12. 40 
Earning value of real estate per acre: 
Net return per acre capitalized at— 
I'OUr Per cCenti=2 2822 sek eae See a eee 665 148 46 310 
Five sper cents 22836 2: Se SPs ne ee eee 532 118 37 248 
SS IRATE I COT a se ces pe ep 443 98 30 207 
Seven pencent 223 4S y te SS se ee een 380 84 26 177 
1 Carried forward from Table 7. 
A comparison of land values obtained by three methods for the 
year 1919 follows. This year is selected because it represents the 
peak year of prosperity before the slump in the prices of Fac prod- 
ucts. The average acre value of real estate when based on 59 actnal 
sales made in 1919 and 1920 was $375 (fig. 5), when based on the 
estimates of 190 farm operators $373 (Pable 6), and when based on 
the assumption that the investment in real estate should earn 7 per 
cent, $380 (Table 9). This is a variation of but $7 per acre in the 
values obtained by the three methods. The significance of this 
appears below. 
The chief factor governing the acre value of farm land, it is said, 
is yield or income. By yield is meant the present income per acre 
and the anticipated future incomes over a period of years. The fore- 
going discussion has shown that the average values of real estate in 
1919 based (1) on the sales value, (2) on the estimates of 190 farm 
operators, and (3) on the net return per acre capitalized at 7 per cent 
were almost identical. It would appear, therefore, that the sales 
value and the estimated value of the 190 operators for 1919 were 
based entirely upon present income (the incomes of the most pros- 
perous years of the boom period), or that future incomes (if con- 
sidered at all) were looked upon with a great deal of optimism. 
Inability to anticipate and judge the future, it is now easy to see, 
