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Iowa land prices still climbing, but not as quickly

Agriculture.com Staff 02/13/2016 @ 7:45pm

Iowa crop land values increased an average of 17.6% during the year which ended September 1. The biggest share of that -- 11% -- came between September 1, 2007, and March 1, 2008, however. The increase since March 1 was 6.6%.

Those figures are from the Iowa Farm and Land Realtors survey of realtors who specialize in farm and land sales, management and appraisal. The survey was conducted by Troy Louwagie, an Accredited Land Consultant with Hertz Real Estate Services.

"This is the fourth-highest annual increase in the state since we started the surveys in 1978," says Louwagie. The surveys are conducted twice a year. Participants are asked to estimate the average value of bare, unimproved land with selling prices on a cash basis.

The biggest average increase was posted last year when average farmland values had increased 20.7% for the year that ended September 1, 2007. The second highest increase -- 20.2% -- came during the year which ended on March 1, 1988. The third highest increase -- 18% -- was for the year that ended in March of 2008. (Part of that year overlapped with the current year).

"We are up 70% in appreciation over the last five years," says Louwagie. "In addition, returns from crop income or cash rent historically add three to five percent annually."

For purposes of the survey, Iowa is divided into nine reporting districts of roughly equal size. All nine districts showed an increase in crop land and pasture values. However, five districts showed a decline in the value of timber land over the past six months.

"We are seeing a lot of variability in prices across the state," says Louwagie. He says there are areas of the state that are "red hot" and there are other areas where prices have leveled off due to uncertainty about yields.

The size of the increase in crop land values over the past six months varied from 2.7% in East Central Iowa to 8.7% in Southwest Iowa.

Survey respondents were asked to estimate crop land values in three categories, based on its potential for corn production. Those categories are high quality, medium quality and low quality.

The statewide average value for high quality crop land was $5,619 on September 1. High quality land in three of the reporting districts was valued at over $6,000 per acre. Those three districts were: West-central ($6,193 per acre), northeast ($6,071) and central ($6,016 per acre).

The statewide average value for medium quality crop land was pegged at $4,528 on September 1. Prices ranged from $3,301 in south-central Iowa to $5,173 in west-central Iowa.

Low quality crop land had an average value of $3,536 on September 1, according to the survey. It ranged from $2,746 in South Central Iowa to $4,108 in northwest Iowa.

Non-tillable pasture had a statewide average value of $2,044 while timber was pegged at $2,003.

The survey revealed some other changes in the market. "There are a lot fewer 1031 exchange buyers," says Louwagie. "And the pendulum has swung back to where farmers are the primary buyers."

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