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Iowa Farmland Values Drop 1%

Results of semi-annual Land Trends and Values Survey shows volatile land market. 

Iowa farmland values have declined 1.0% statewide since September 2019, based on results from the March 2019 Land Trends and Values Survey distributed by the Realtors Land Institute – Iowa Chapter today, at the chapter’s spring meeting in Ames.

Across the state, land in the southeast Iowa district increased 3.0% on average, and east central, 0.4%. Values in north-central and northeast Iowa declined 2.8% and 2.7%, respectively, according to the survey results. Other area results are: west central, up 0.4%; northwest, down 0.5%; south-central, down 1.0%; east-central, down 1.3%; southwest, down 1.6%; central, down 1.9%. The state average value for farmland is $6,794. That's down from the high of $8,286, in March 2014. 

Kyle Hansen, accredited land consultant and auctioneer at Hertz Real Estate Services and chairman of the Land Trends Committee for the RLI, says the semi-annual survey was taken from about 130 members of the RLI and is based on the past six months of ag land transactions. These estimates are for bare, unimproved land with a sale price on a cash basis. Pasture and timberland values were also requested as supplemental information.

Kyle Hansen, ALC, Hertz Real Estate Services and Iowa Chapter, Realtors Land Institute
Hansen (shown at right) says southeast Iowa’s land values could be influenced by improving weather conditions. Three years ago, the region was mired in drought. Last summer, the drought broke. “They had a little more positive outlook moving forward. There was pent-up demand, waiting to buy the right piece of land when the weather sorted out,” Hansen says. 

In northern Iowa, too much rain has dampened buyers’ enthusiasm, he adds. Kossuth County, Iowa, reported 55 inches of rain in 2018, one conference attendee reported. That has certainly influenced enthusiasm for land purchases in that area, he adds.

Statewide, farmland transactions are volatile, Hansen says. “Some areas are up; some areas are soft.”

On the negative side, however, survey respondents cite low commodity prices and trade uncertainty as influences in farmland purchases along with decreased working capital and the gradual increase of interest rates. “Also, the trend toward lower cash rents,” Hansen says. “Some investors want a certain rate of return and are looking at different properties.”

Other items of note from the survey:

  • Auctions are preferred. Since September, 60% of the farmland transactions have been by auction. Hansen notes that 40% were private listings, but those are more for medium to lower quality land. 
  • Volatile land values coming. Realtors expect land values to remain volatile for the next one to three years. Prices will depend on production and crop prices, with some survey respondents expecting steady to higher farmland prices; others steady to lower. 
  • More lease buybacks are occurring. While still a small percentage, some landowners are choosing to sell land, with the option to lease it back for a certain amount of time, in order to improve cash flow. 
  • Farmers are still buying. Transactions tracked by the RLI indicate that 77% of the land sold in the last six months was bought by farmers, with 18% by investors. Hansen says potential buyers using 1031 Exchange influence up to 20% of land auctions, either by buying or bidding. 
  • Stable rate of return. Buyers average a 2.9% rate of return on cropland (with a range of 2% to 4%) and 4.3% on Conservation Reserve Program land (with a range of 3% to 6%). 
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