1996 Iowa Land Value Survey News Release

12/18/96
Contacts: Michael D. Duffy, Extension Economics, (515) 294-3000
Del Marks, Extension Communications, (515) 294-9807

IOWA FARMLAND VALUES UP $227 PER ACRE, BIGGEST JUMP SINCE 1979

AMES, Iowa -- The value of Iowa farmland increased an average of $227 an acre in 1996, according to the annual survey of land values conducted by Iowa State University. The increase was the largest since 1979 when values jumped $312 an acre during the run-up before the crash of the mid-1980s.

The 1996 state average for all grades of land was estimated to be $1,682 per acre, said ISU Extension economist Michael D. Duffy who directed the annual survey of farm real estate brokers. That figure is 78 percent of the all-time high land value of $2,147 per acre reached in 1981. Following the 1981 peak, values dropped 63 percent, to a low of $787 per acre in 1986. The 1996 value is more than double the 1986 value.

Duffy said values increased an average of 15.6 percent statewide from 1995 to 1996, the largest percentage increase since 1988 when values went up 20.4 percent during the early years of the recovery. The 1996 survey marked the 10th year in a row that prices increased.

Duffy said there are fewer causes for concern now than in the 1970s over the increase in value. "Although attention is warranted, conditions are fundamentally different" than they were in the 1970s, Duffy said. "Inflation rates and interest rates are lower," he said, "and we are not seeing the level of borrowing by farmers that we did in the mid-1970s."

"The 1996 survey reflects very closely what is happening in the state," Duffy said. "Higher crop prices and better than expected yields increased the earnings from the land. Continuing low interest rates and concern over the stock market also make land more attractive as an investment."

Sixty-nine percent of the sales this year were to existing farmers, with investors making 23 percent of the purchases, new farmers 4 percent, and other buyers 4 percent. Sales to existing farmers ranged from 84 percent in the west central crop reporting district to 57 percent in the southeast district. Sales to investors ranged from 34 percent in the southeast district to 13 percent in the north central crop reporting district.

While values are going up, the amount of land being sold is not changing much, the survey found. Nearly half of the survey respondents (48 percent) said the number of sales in 1996 was about the same as in 1995, while 29 percent said there were more sales in 1996, and 23 percent said there were fewer sales in 1996.

Low grade land showed the greatest percentage increase in 1996, with average value at $936 an acre, up 18.1 percent over 1995. Medium grade land was up 14.5 percent to $1,514 an acre, and high grade land was up 15.1 percent to $2,151.

The average increase in value of 15.6 percent is somewhat higher than other recent surveys of Iowa land values, Duffy said. "It is important to remember the different time periods covered when comparing surveys," he added, noting that the ISU survey is based on data collected beginning Nov. 1.

The ISU survey of Iowa farmland values has been conducted annually since 1941 and is the only survey that reports data individually for all 99 Iowa counties. It is based on reports from licensed real estate brokers and individuals knowledgeable of land market conditions. Only the state and district averages are based directly on the survey data. County averages are determined by combining survey information gathered in every county with data collected by the U.S. Census of Agriculture.

This year 681 usable responses were received from the mailing of about 1,100 survey forms, compared with an average of 500 to 600 responses in recent years. Duffy said the higher response rate indicates strong interest among farm real estate professionals in the survey findings.

The Iowa land value survey is co-sponsored by the Iowa Agriculture and Home Economics Experiment Station and ISU Extension.

Trends from the 1996 survey include the following: