The only years in the past half century with higher average values were 1979, 1980 and 1981, when the average value peaked at $2,147, said Michael Duffy, ISU Extension economist who directed the survey. Following the 1981 peak, Iowa land lost nearly two-thirds of its value, bottoming out at $787 an acre in 1986. The 1997 survey findings indicate that the average value of an acre of land has increased 133 percent in the past 11 years, and it has regained 86 percent of the peak 1981 value.
The average price statewide of an acre of land increased 9.2 percent in 1997. That was a gain of $155 from 1996 when the average was $1,682 an acre. Low grade land had the largest percentage gain in 1997, increasing 11.3 percent to an average of $1,042 per acre. Medium grade land increased 10.2 percent to $1,668 and high grade land increased 8.2 percent to $2,328.
Generally, counties with the lowest average values saw the greatest percentage of increase. Many of these counties are located in southern Iowa where values increased 13.5 percent in the southwest crop reporting district and 12.5 percent in the south central crop reporting district. Average value was $957 in the south central district and $1,369 in the southwest district, the two lowest of the nine crop reporting districts. The east central crop reporting district, which has long had some of the highest valued land in the state, showed an average increase of 7.4 percent this year, the lowest among the nine districts. Highest overall average value was $2,295 per acre in the central district, up 9.8 percent from last year.
As has been the case for the past several years, Scott County again reported the highest average land value at $2,913 per acre and Decatur County was lowest at $757. Wright County had the greatest dollar increase at $224 per acre for a total value of $2,604, and Clayton County had the greatest percentage increase of 13.3 percent for a total value of $1,452.
As part of his research this year, Duffy analyzed data since 1950 that affects the value of farmland, including the market price of corn and changes in productivity. At the beginning of the period studied, Duffy said corn yields averaged 49 bushels per acre and corn sold for $1.52 a bushel, producing revenue of $74 per acre in 1950 when land sold for $218 an acre. Yields have increased dramatically in the past 47 years, peaking at 152 bushels in 1994 and consistently exceeding 100 bushels per acre statewide during most of the past 20 years. Prices have fluctuated widely, reaching highs of $3.12 in 1983 and $3.20 in 1995 and dropping to $1.41 in 1986 and $2.00 in 1992.
An analysis of the ratio between gross income per acre of land and the cost of the land indicates that land cost least in 1952 and 1972-73 when land sold for about 2.5 times the revenue it produced, Duffy said. At the other end of the scale, land sold for more than 7 times its revenue value in 1976 and 1981 and nearly 8.5 times the revenue produced in 1977. In 1986, when land values hit bottom after the 1981 peak, land was selling for about 4 times its revenue value, and in 1997 the average value is about 5 times the amount of revenue produced per acre in 1997.
Duffy said that while land has steadily increased in value, the fact that it is not near the top extreme in comparison to what it will produce, indicates it may not be overvalued to the extent that it was at the time of the 1981 peak.
Survey respondents were asked for their opinions on what were the positive influences and the negative influences on land values in 1997. Higher crop prices were viewed as a positive factor by 32 percent of those polled, while 31 percent said good crop yields helped boost land values and 27 percent said lower interest rates were a positive factor. The only other factor mentioned by more than 10 percent of the respondents was the availability of land. Sixteen percent indicated that land prices were driven up by a shortage of farmland on the market.
Few respondents reported negative influences in 1997, with 9 percent mentioning rising production costs as a factor holding down land values. Eight percent said the supply of land available was a negative factor, and another 8 percent said low crop prices was a negative factor.
Seventy-three percent of the land sales statewide in 1997 were to existing farmers, ranging from 55 percent to existing farmers in the south central crop district to 88 percent in the northwest district. Investors bought 22 percent of the land statewide, including 38 percent of the sales in southwest Iowa. New farmers accounted for 3 percent of the sales statewide and 7 percent in northeast Iowa.
Forty-seven percent of the poll respondents said sales levels were about the same in 1997 as the year before, while 28 percent said there were fewer sales. The south central district had the highest number of respondents reporting more sales, 46 percent, while the central district had the highest number of respondents reporting fewer sales in 1997, 40 percent.
The survey conducted by Iowa State University is mailed annually to about 1,100 licensed real estate brokers, ag lenders and others considered to be knowledgeable of land market conditions. This year's findings were based on 631 usable responses. The survey instrument and analysis are funded by the Iowa Agriculture and Home Economics Experiment Station at ISU and results are disseminated by ISU Extension. Complete survey results are available at the ISU Extension web site at www.exnet.iastate.edu.
To access this news release electronically, visit the Iowa State University Extension Internet site at
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