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Iowa land values continue to climb Tuesday, December 21, 2004
Agri News staff writer
AMES, Iowa -- Land values increased by double digits in all Iowa crop reporting districts in 2004, and the average value of farmland is at an all-time high of $2,629 per acre, an annual Iowa State University survey shows.
"The land market is hot,'' said Mike Duffy, ISU Extension farm economist who conducts the survey.
The 2004 average farmland value topped a previous record of $2,275 reported last year, and a 15.6 percent increase over the 2003 average. Duffy said inflation on the value of the dollar means that the 2004 figure is roughly the same as the value of land in 1973, before the run in values began that led to a peak of $2,147 in 1981.
After the 1981 peak Iowa land values dropped sharply, reaching a statewide average of $787 per acre in 1986. The 2004 figure represents an increase of 234 percent in the past 18 years.
Values increased in all 99 counties and topped $1,000 an acre in every county for the first time since ISU began conducting the survey in 1941. Twenty-seven counties had an average value of more than $3,000 per acre this year, compared with only four in that category in 2003. The average value in Scott County this year was $4,167 -- the first time a county has topped the $4,000 level.
The survey of real estate brokers, farm lenders and others who work directly with the land markets indicated the increases topped 10 percent in all nine of the state's crop-reporting districts. The smallest percentage increase was 7.7 percent in Jones County, and the largest increase was 22.9 percent in Hardin County. The largest dollar increase was $592 per acre in Humboldt County.
Iowa farmland has increased in average value by about 47 percent over the past five years.
Duffy said he is frequently asked whether the increase in prices is likely to result in a crash in land values similar to the one that occurred in the mid-1980s.
"That is a very difficult question to answer," Duffy said. "The answer really is it depends.''
Factors that will influence future land values include the level of government farm programs and federal budget, trade and monetary policy.
The cost of farm programs could make them a political target, which would have an adverse effect on land values, Duffy said. Challenges to the legality of U.S. farm subsidies, such as the Brazilian challenge to cotton, also could be a factor. Federal monetary policies might be a factor if interest rates increase.
Low-interest rates were a major factor in value increases this year and were mentioned by 45 percent of survey respondents. Other positive factors were good crop yields in 2003, strong demand for land as an investment, good grain prices, favorable tax treatment of land transactions and the scarcity of land on the market.
Negative factors that worked to hold down prices this year included lower current grain prices and the belief that land prices are too high to provide enough cash flow to pay for the purchase.
About 1,100 copies of the survey are mailed each year to licensed real estate brokers, ag lenders, and others knowledgeable of Iowa land values; 516 were returned this year.
Additional information on the 2004 survey is available on the ISU Extension web site at http://www.extension.iastate.edu/emms/lvs2004/. |
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