2006 IOWA LAND VALUE SURVEY: OVERVIEW
Prepared by Michael D. Duffy, agricultural extension economist and Darnell Smith, extension associate, Iowa State University, December 19, 2006.
1.0 History and Purpose of the Land Value Survey.
1.1 The survey was initiated in 1941 and is sponsored annually by the Iowa Agriculture and Home Economics Experiment Station, Iowa State University. Only the state average and the district averages are based directly on the ISU survey data. The county estimates are derived by using a procedure that combines the ISU survey results with data from the U.S. Census of Agriculture. The survey was conducted by Michael Duffy and Darnell Smith.
1.2 The survey is intended to provide information on general land value trends, geographical land price relationships and factors influencing the Iowa land market. The survey is not intended to provide an estimate for any particular piece of property.
1.3 The survey is based on reports by licensed real estate brokers and selected individuals considered to be knowledgeable of land market conditions. Approximately 1,100 surveys are mailed each year. Normally 500-600 completed surveys are returned.
1.4 Respondents were asked to report on more than one county if they were knowledgeable about the land markets. The 2006 survey is based on 490 usable responses providing estimates on 623 county land values.
1.5 Participants in the survey are asked to estimate the value of high, medium and low grade land in their county. Comparative sales and other factors are taken into account by the respondents in making these value estimates.
2.0 Analysis by State.
2.1 The 2006 state average for all grades of land was estimated to be $3,204 per acre.
2.2 The increase in the state value was $290 per acre from 2005.
2.3 The percentage increase was 10 percent from 2005.
3.0 Analysis by Crop Reporting District.
3.1 The highest land values were reported for Northwest, $3,783 per acre.
3.2 The lowest land values were estimated for South Central Iowa, $1,927 per acre.
3.3 The greatest percentage increase was in Southeast Iowa, 14.7 percent.
3.4 The least percentage increase was in South Central Iowa, 7.5 percent.
4.0 Analysis by Counties.
4.1 The highest value was estimated for Scott county, $5,073 per acre.
4.2 The lowest value was in Decatur county, $1,465 per acre.
4.3 The greatest dollar increase was $495 in Louisa county.
4.4 The greatest percentage increase was 17.2 percent reported in Audubon county.
5.0 Analysis by Quality of Land.
5.1 Low grade land in the state averaged $2,195 per acre and showed a 11.9 percent increase or $234 per acre.
5.2 Medium grade land averaged $3,011 per acre and showed a 10.1 percent increase or $275 per acre.
5.3 High grade land averaged $3,835 per acre and showed an increase of 9.2 percent or $324 per acre.
6.0 Major Factors Influencing the Real Estate Market.
Survey respondents listed both positive and negative factors influencing the land market. The respondents listed multiple factors in most cases.
6.1 There were six positive factors listed by more than10 percent of the respondents.
6.2 Good grain prices was by far the most frequently mentioned positive factor, being mentioned by 42 percent of the respondents.
6.3 Other positive factors were: good yields (18 percent); low interest rates, 1031 tax exchanges and bio-fuel demand (14 percent) and scarcity of listings (13 percent).
6.4 There were 3 negative factors listed by more than 10 percent of the respondents. The up trending interest rates were listed by 22 percent of the respondents. High input, machinery and low profitability in general (12 percent) and land prices too high (11 percent).
7.0 Number of Sales Compared to Previous Year.
When asked to compare the number of sales in 2006 relative to 2005, 26 percent reported more, 51 percent the same, and 23 percent reported less.
8.0 Land Sales by Buyer Category.
The 2006 survey asked respondents what percent of the land sales were sold to four categories of buyers.
8.1 The majority of farmland sales: 60 percent were to existing farmers. Investors represented 35 percent of the sales. New farmers represented 3 percent of the sales and, other purchases were 2 percent of sales.
8.2 Sales to existing farmers by Crop Reporting Districts ranged from 75 percent in Northwest to 39 percent in South Central.
8.3 Sales to investors were highest in South Central (56 percent). Northwest reported the lowest investor activity (23 percent).
9.0 Interpretation of Survey Results.
The 2006 survey marks the fourth straight year that Iowa land values have set a record high. For the first time a county average value was more than $5,000 per acre. Almost all counties and crop reporting districts showed considerable strength. Nearly half (45 percent) of the counties showed increases of more than 10 percent and 52 percent of the counties showed increases of between 5 and 10 percent. In 2006, seven counties had average values over $4,000 per acre. This compares to just one county last year. There were 59 counties with values between $3,000 and $4,000 per acre, compared to 51 last year.
The results of this year’s survey are notable not just for the relative strength and record values reported. There was a wide variation among the respondents with respect to the percent change in land values. Also, the ISU survey showed considerable differences from the other surveys of Iowa land values.
The majority of the increase in value appears to have occurred in just the past few months. Other surveys of Iowa land values indicated the increase in value would have only been about one-half of the value reported in this year’s survey if trends had continued. For example, in September of this year the Realtors Land Institute reported an increase of just 2.9 percent from March through September. The Chicago Federal Reserve Board in the November AgLetter reported that their survey, as of Oct. 1, “provided evidence of cooling after two years of double-digit gains in farmland value.” They went on to further report that only a fourth of the lenders felt land values would increase in the fourth quarter and that “71 percent forecasted stable values.” Part of the difference between the AgLetter report and the ISU survey is due to the different areas covered. The AgLetter encompasses the entire Seventh Federal Reserve District. The timing of the survey, however, appears to represent a large part of the difference in the two surveys.
The AgLetter reported Iowa land values had only gained an estimated one percent for the third quarter of the year and just five percent for the year from October 2005 to October 2006. It is interesting to note the first half of the ISU survey respondents reported a 9.8 percent whereas the second half of the respondents reported a 12.2 percent increase.
The turnaround in land value increases can be traced to the rapid increases in grain prices. Almost half of the survey respondents identified favorable grain prices as a positive factor and another 14 percent credited the bioeconomy which, at this time, is primarily corn based. The change in corn prices is very clear. The average corn price for Iowa, as reported by the USDA, was $2.07 per bushel for the period from January to October. Today the cash corn prices are well over $3.00 and it is possible to forward price corn for the next couple of years for that price. Soybean prices have moved similar to corn over the past few months. The January to October average Iowa price was $5.34 per bushel and the price today is over $6.20 per bushel.
The change in the demand for corn is having far reaching impacts on Iowa agriculture. Land values and rents are increasing. We are seeing basis changes. The demand for corn for ethanol is changing the relative county prices for corn. There are impacts and implications for the export market and on the livestock sector. There will be a shift in the rotation followed on many farms.
Another change that occurred is who is buying Iowa farmland. For the past several years the trend has been towards more investor purchases and less farmer purchases. This year’s survey shows a reversal of that trend. In this year’s survey the percent of land being purchased by existing farmers increased from 56 to 60 percent while the percent being purchased by investors decreased from 39 to 35 percent.
The increases in Iowa land values over the past few years raised the question about whether or not the land market was overheated and “were we setting ourselves up for another fall.” The double digit increase for the third year in a row continues to raise those questions although many are saying that the new bioeconomy demand represents a permanent change in demand and that the land values will increase to reflect this new demand and income potential.
A new question being raised is whether or not we are entering a time similar to the early 1970s. There are several important differences to keep in mind when pondering that question. Iowa land values increased over 30 percent per year for 1973, 1974 and 1975. The current increases in values are no where near that level. The boom in the values in the early 1970s followed a period of relative stability in Iowa land values. The increases we are seeing today are coming at a time when Iowa land values have been increasing fairly steadily over the past several years. Since 2000 Iowa land values have increased $1,347 per acre on average or a 73 percent increase. This is a substantial increase, to be sure, but it is no where near the over 125 percent increase in values from 1972 to 1975. There are other differences such as the level of inflation, the fact that the more land is held without debt and the fact that more land is being held by older people.
Is the increase in prices and income per acre permanent? Will a 3.5 percent capitalization rate be acceptable in the future? How will the livestock sector react to the higher prices and the availability of alternative feeds? How will the export market react, not only to the higher prices but other world events? What does it mean to have corn prices tied to the price of oil? What are the environmental impacts of changing rotations? Finally, what are the impacts of these prices on beginning farmers?
The list of questions could go on and, unfortunately there aren’t good answers readily available. This all leads to the high level of uncertainty with respect to what will happen with Iowa land values and where we are headed.
Table 1. Recent Changes in Iowa Farmland Values
Value Per Acre | Dollar Change | Percentage Change | |
1968 |
409 |
12 |
3.0 |
1969 |
419 |
10 |
2.5 |
1970 |
419 |
0 |
0.0 |
1971 |
430 |
11 |
2.6 |
1972 |
482 |
52 |
12.0 |
1973 |
635 |
154 |
31.9 |
1974 |
834 |
199 |
31.3 |
1975 |
1,095 |
261 |
31.3 |
1976 |
1,368 |
273 |
24.9 |
1977 |
1,450 |
82 |
6.0 |
1978 |
1,646 |
196 |
13.5 |
1979 |
1,958 |
312 |
19.0 |
1980 |
2,066 |
108 |
5.5 |
1981 |
2,147 |
82 |
3.9 |
1982 |
1,801 |
-346 |
-16.1 |
1983 |
1,691 |
-110 |
- 6.1 |
1984 |
1,357 |
-334 |
-19.8 |
1985 |
948 |
-409 |
-30.2 |
1986 |
787 |
-161 |
-17.0 |
1987 |
875 |
88 |
11.2 |
1988 |
1,054 |
179 |
20.4 |
1989 |
1,139 |
85 |
8.1 |
1990 |
1,214 |
75 |
6.6 |
1991 |
1,219 |
5 |
.4 |
1992 |
1,249 |
30 |
2.5 |
1993 |
1,275 |
26 |
2.1 |
1994 |
1,356 |
81 |
6.4 |
1995 |
1,455 |
99 |
7.3 |
1996 |
1,682 |
227 |
15.6 |
1997 |
1,837 |
155 |
9.2 |
1998 |
1,801 |
-36 |
-1.9 |
1999 |
1,781 |
-20 |
-1.1 |
2000 |
1,857 |
76 |
4.3 |
2001 |
1,926 |
69 |
3.7 |
2002 |
2,083 |
157 |
8.2 |
2003 |
2,275 |
192 |
9.2 |
2004 |
2,629 |
354 |
15.6 |
2005 |
2,914 |
285 |
10.8 |
2006 |
3,204 |
290 |
10.0 |
Year |
State |
Northwest
|
North |
Northeast
|
West |
Central |
East |
Southwest
|
South |
Southeast |
All Grades
|
||||||||||
1981 |
2147 |
2562 |
2721 |
2227 |
2056 |
2538 |
2530 |
1586 |
1184 |
1790 |
1986 |
787 |
937 |
912 |
786 |
768 |
930 |
1000 |
607 |
403 |
705 |
1987 |
875 |
1084 |
1055 |
835 |
871 |
1044 |
1053 |
676 |
421 |
782 |
1995 |
1455 |
1755 |
1724 |
1330 |
1528 |
1766 |
1676 |
1102 |
742 |
1367 |
1996 |
1682 |
2071 |
1997 |
1559 |
1758 |
2090 |
1965 |
1206 |
851 |
1502 |
1997 |
1837 |
2263 |
2194 |
1721 |
1894 |
2295 |
2110 |
1369 |
957 |
1580 |
1998 |
1801 |
2174 |
2119 |
1757 |
1820 |
2192 |
2123 |
1373 |
948 |
1585 |
1999 |
1781 |
2059 |
2073 |
1807 |
1837 |
2128 |
2118 |
1346 |
981 |
1570 |
2000 |
1857 |
2198 |
2169 |
1868 |
1924 |
2195 |
2190 |
1412 |
992 |
1655 |
2001 |
1926 |
2240 |
2240 |
1950 |
1969 |
2246 |
2324 |
1511 |
1039 |
1705 |
2002 |
2083 |
2434 |
2367 |
2149 |
2101 |
2392 |
2547 |
1632 |
1211 |
1808 |
2003 |
2275 |
2683 |
2514 |
2347 |
2329 |
2652 |
2715 |
1774 |
1354 |
1979 |
2004 |
2629 |
3118 |
2913 |
2665 |
2728 |
3101 |
3054 |
2088 |
1547 |
2286 |
2005 |
2914 |
3393 |
3222 |
2963 |
3048 |
3415 |
3396 |
2350 |
1793 |
2483 |
2006 |
3204 |
3783 |
3478 |
3 |
3410 |
3716 |
3725 |
2580 |
1927 |
2849 |
|
High Grade |
|||||||||
1981 |
2759 |
3035 |
3209 |
2885 |
2576 |
3061 |
3293 |
2050 |
1880 |
2726 |
1986 |
1048 |
1131 |
1094 |
1048 |
1000 |
1154 |
1343 |
832 |
682 |
1120 |
1987 |
1150 |
1306 |
1260 |
1102 |
1125 |
1288 |
1399 |
912 |
688 |
1229 |
1995 |
1869 |
2058 |
1968 |
1729 |
1939 |
2159 |
2131 |
1483 |
1163 |
2091 |
1996 |
2151 |
2431 |
2300 |
2015 |
2210 |
2558 |
2518 |
1586 |
1316 |
2291 |
1997 |
2328 |
2647 |
2531 |
2210 |
2350 |
2790 |
2673 |
1786 |
1443 |
2383 |
1998 |
2284 |
2534 |
2449 |
2238 |
2268 |
2659 |
2683 |
1798 |
1455 |
2369 |
1999 |
2249 |
2401 |
2362 |
2275 |
2288 |
2589 |
2685 |
1773 |
1499 |
2271 |
2000 |
2324 |
2547 |
2462 |
2329 |
2375 |
2660 |
2743 |
1825 |
1509 |
2353 |
2001 |
2407 |
2588 |
2546 |
2439 |
2437 |
2685 |
2907 |
1947 |
1582 |
2447 |
2002 |
2576 |
2776 |
2676 |
2625 |
2583 |
2848 |
3105 |
2117 |
1931 |
2539 |
2003 |
2790 |
3040 |
2817 |
2857 |
2820 |
3121 |
3263 |
2285 |
2121 |
2783 |
2004 |
3193 |
3537 |
3265 |
3189 |
3264 |
3621 |
3659 |
2657 |
2358 |
3174 |
2005 |
3511 |
3813 |
3588 |
3522 |
3691 |
3935 |
4069 |
2925 |
2659 |
3385 |
2006 |
3835 |
4261 |
3834 |
3816 |
4072 |
4263 |
4443 |
3209 |
2663 |
3793 |
|
Medium Grade |
|||||||||
1981 |
1931 |
2252 |
2334 |
2052 |
1866 |
2279 |
2258 |
1472 |
1149 |
1604 |
1986 |
699 |
830 |
777 |
709 |
684 |
813 |
866 |
561 |
396 |
622 |
1987 |
780 |
957 |
903 |
754 |
776 |
928 |
925 |
630 |
413 |
696 |
1995 |
1322 |
1598 |
1558 |
1216 |
1394 |
1580 |
1510 |
1009 |
726 |
1210 |
1996 |
1514 |
1873 |
1769 |
1423 |
1585 |
1843 |
1752 |
1111 |
829 |
1321 |
1997 |
1668 |
2033 |
1945 |
1577 |
1742 |
2050 |
1910 |
1280 |
945 |
1404 |
1998 |
1638 |
1970 |
1885 |
1604 |
1670 |
1968 |
1930 |
1274 |
924 |
1414 |
1999 |
1629 |
1876 |
1869 |
1665 |
1692 |
1898 |
1945 |
1241 |
949 |
1433 |
2000 |
1701 |
2001 |
1972 |
1728 |
1772 |
1956 |
1996 |
1320 |
955 |
1511 |
2001 |
1768 |
2057 |
2040 |
1800 |
1807 |
2013 |
2125 |
1410 |
1004 |
1571 |
2002 |
1924 |
2278 |
2142 |
2010 |
1930 |
2175 |
2358 |
1522 |
1152 |
1659 |
2003 |
2123 |
2507 |
2309 |
|
2167 |
2438 |
2543 |
1659 |
1307 |
1834 |
2004 |
2457 |
2930 |
2669 |
2515 |
2564 |
2858 |
2863 |
1956 |
1492 |
2118 |
2005 |
2736 |
3199 |
2982 |
2834 |
2833 |
3165 |
3172 |
2217 |
1725 |
2347 |
2006 |
3011 |
3561 |
3223 |
2987 |
3213 |
3458 |
3501 |
2442 |
1866 |
2679 |
|
Low Grade |
|||||||||
1981 |
1157 |
1460 |
1517 |
1220 |
1125 |
1336 |
1366 |
959 |
624 |
752 |
1986 |
377 |
488 |
468 |
405 |
350 |
475 |
460 |
290 |
176 |
257 |
1987 |
432 |
571 |
553 |
444 |
419 |
535 |
495 |
341 |
207 |
289 |
1995 |
792 |
992 |
1049 |
737 |
812 |
967 |
925 |
614 |
400 |
574 |
1996 |
936 |
1213 |
1207 |
878 |
981 |
1146 |
1073 |
688 |
479 |
674 |
1997 |
1042 |
1354 |
1337 |
992 |
1083 |
1279 |
1186 |
787 |
544 |
730 |
1998 |
1030 |
1299 |
1286 |
1059 |
1021 |
1258 |
1205 |
792 |
542 |
739 |
1999 |
1045 |
1216 |
1314 |
1110 |
1040 |
1296 |
1188 |
798 |
582 |
790 |
2000 |
1117 |
1370 |
1387 |
1167 |
1126 |
1299 |
1288 |
862 |
597 |
875 |
2001 |
1170 |
1388 |
1423 |
1208 |
1202 |
1416 |
1404 |
918 |
623 |
871 |
2002 |
1322 |
1571 |
1568 |
1448 |
1332 |
1516 |
1628 |
996 |
760 |
997 |
2003 |
1463 |
1808 |
1682 |
1512 |
1500 |
1707 |
1811 |
1130 |
858 |
1063 |
2004 |
1713 |
2087 |
1976 |
1816 |
1746 |
2028 |
1998 |
1354 |
1029 |
1272 |
2005 |
1961 |
2382 |
2252 |
2032 |
1970 |
2353 |
2237 |
1614 |
1252 |
1438 |
2006 |
2195 |
2566 |
2500 |
2248 |
2293 |
2615 |
2505 |
1729 |
1373 |
1786 |
Crop
Reporting District |
|
|
Less |
Percent |
|||
Northwest |
31 |
52 |
17 |
North
Central |
38 |
48 |
15 |
Northeast |
18 |
59 |
23 |
West
Central |
21 |
46 |
33 |
Central |
38 |
47 |
15 |
East
Central |
20 |
51 |
29 |
Southwest |
13 |
60 |
27 |
South
Central |
22 |
41 |
37 |
Southeast |
29 |
60 |
12 |
State |
26 |
51 |
23 |
|
Existing Farmers |
Investors |
New Farmers |
Other |
Percent |
||||
Northwest |
75 |
23 |
0 |
2 |
North Central |
57 |
39 |
3 |
1 |
Northeast |
68 |
25 |
4 |
3 |
West Central |
69 |
27 |
1 |
3 |
Central |
51 |
45 |
4 |
0 |
East Central |
61 |
34 |
1 |
4 |
Southwest |
53 |
44 |
2 |
1 |
South Central |
39 |
56 |
2 |
3 |
Southeast |
68 |
24 |
5 |
3 |
State |
60 |
35 |
3 |
2 |