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Iowa land prices continue upward climb

Wednesday, December 12, 2012

"Historical peaks" in the value of Iowa's farm land are evident in the 2012 Iowa Land Value Survey released Tuesday.

Values increased more than 15 percent for the third year in a row.

Iowa State University's Mike Duffy, who conducted the survey, said the increases put the average value of farm land at $8,296 per acre or a 23.7 increase over 2011 values.

This increase somewhat higher than the most recent Chicago Federal Reserve Bank survey showing an increase of an estimated 18 percent from October 2011 to October 2012.

The difference in the increases between Duffy's report and the federal reserve could be the result of more rapid increases in the past few months than earlier in the year, Duffy said.

An additional survey by the Iowa Chapter of the Realtors Land Institute had shown an estimated 7.7 percent increase from March to September 2012.

Plymouth County's 2012 average land value has risen to $11,266 as compared to $8,678 in 2011.

The increase is approximately $2,500 an acre or 29.8 percent.

Elsewhere in northwest Iowa, Sioux County showed an average value of $12,502 compared to the previous year's $9,419 and Lyon County with a per acre 2012 average of $11,295 compared to $8,355 in 2011.

Duffy cited "better than expected crop yields" and the level of "land sale activity" due to proposed land related taxes contributed to the increasing values shown in his Tuesday report.

"The Iowa State survey samples different populations, and uses different wording than the other surveys. This could also lead to different results especially in times of uncertainty," Duffy said. "Even within the Iowa State survey there was considerable variation in the estimates."

O'Brien County had an estimated $12,862 average value, the highest average county value. O'Brien County also had the highest percentage increase and highest dollar increase in value, 35.2 percent and $3,348, respectively. Osceola, Dickinson and Lyon counties also saw 35.2 percent increases.

The Northwest Crop Reporting District, which includes all four counties, reported the highest land values at $12,890, an increase of $3,241 (36.8 percent) from 2011.

Osceola County's most recent average is shown at $11,426 as compared to $8,452 the previous year.

The 2012 figure for Cherokee County is put at $10,739 in comparison with 2011's average of $8,103.

Per acre average value of farmland in Buena Vista County is $11,501 for 2012 compared to $8,693 in 2011.

The current Woodbury County average of $8,148 compares to $6,413 in 2011.

Decatur County remained the lowest reported land value, $3,242 per acre, and the lowest dollar increase, $521.

Low-grade land in the state averaged $5,119 per acre and showed a 20.2 percent increase or $862 per acre, while medium grade land averaged $7,773 per acre; high grade land averaged $10,181 per acre.

"The 2012 land value survey covers one of the most remarkable years in Iowa land value history," said Duffy. "This is the highest state value recorded by the survey, and the first time county averages have reached levels over $10,000."

He also said that while "this is an interesting time" there is what he sees as "considerable uncertainty" surrounding future land values.

Duffy said understanding some of the causes for the current increase in farmland values is helpful in assessing the situation.

"Farm land values are highly correlated with farm income," Duffy explained. "As farm income increases, so will land values. In 2005, corn prices averaged $1.94 per bushel in Iowa. The preliminary estimated price for November 2012 is $6.80. Soybean prices changed from $5.54 to $13.70 over the same period."

"Coming into 2012, there was a general sentiment that prices would decline from their peaks. But, the drought changed this and the prices remained at high levels," he continued. "How long the high prices will last is unknown."

Duffy observed there has been considerable variation in commodity prices throughout the past few years while, farm income has increased substantially.

He said that while the increase in income has been the primary cause in the increased land values it is not the only one.

"There are other causes for the increase," Duffy said. "Interest rates are at the lowest level in recent memory. Farm land purchased by investors went from 18 percent in 1989 to 39 percent of purchases in 2005, but investor purchases are back to the 1989 level of 18 percent this year after decreasing for the third year in a row."

Another key component is the cost of production, he said.

In the past, costs have risen in response to higher commodity prices, he said, noting this is especially true for farm land rent.

Iowa State University estimated costs of crop production have shown a 61 percent increase in the cost per bushel since 2005.

Without land, the increase has been 87 percent.

Duffy also said there is still "discipline in the land market," while land values have increased 64 percent in the past three years.

In 2009 values did decrease by 2.2 percent. Therefore, it is prudent to be mindful of the factors that influence land values.

The economist said there are several key components to watch.

Included, he said, are weather related problems -- both here and around the world, government policies -- especially policies related to estate and capital gains tax rates and the amount of debt incurred with land acquisition.

Also to be monitored, he said. are such factors as what happens to input costs with the land being the residual "claimant" to any excess profits in agriculture, government monetary policies as relate to inflation and interest rates, and the performance of the U. S. economy and economies worldwide as they impact commodity prices and in turn, land values.

Maps showing 2012 values, percentage changes and comparisons to 2011 data and additional information from Duffy are available at www.extension.iastate.edu/topic/landvalu....

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And for a sixth of an acre lot consisting of pure white sand where I live, it's a bargain if you can get it for under $250K!!!

-- Posted by Don_Roberts on Thu, Dec 13, 2012, at 7:34 AM

Prices go up because people are willing to pay the price. Nobody HAS to buy it.

Alicia, nice plug for the payday loan website. I bet you dont mind charging the 300% - 750% APR interest rates. Now that my friends is insane!

-- Posted by freedom1776 on Wed, Jan 2, 2013, at 8:58 AM

"This is just so terrible when prices go up" (says Alica). They haven't. The CPI rose only 1.8% for the 12 months preceding December.

Iowa farm land price increases do not mean higher food costs because farmers do NOT control the price they receive. Land prices do NOT have to be affordable, not in a Republic. To say they must be is to ask for government regulation of prices.

How, Alica, does the price of land in Union township affect you?

SocoBama, anyone?!

I know there are exceptions but for anyone in NW Iowa to "have to" pay the exorbitant interest rate blood suckers charge is probably due to poor habits and/or planning. FREEDOM is right - Alica should not be offering such a website.

-- Posted by donpaulin on Wed, Jan 2, 2013, at 11:54 AM

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