2003 IOWA LAND VALUE SURVEY: OVERVIEW

Prepared by Michael D. Duffy, agricultural extension economist, and Darnell Smith, research associate, Iowa State University, December 17, 2003.

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 1100 surveys are mailed each year. Normally 500-600 completed surveys are returned.
1.4 The 2003 survey was the first time respondents were asked to report on more than one county if they were knowledgeable about the land markets. The 2003 survey is based on 541 usable responses providing estimates on 676 county land values.
1.5 Participants in the survey are asked to estimate the value of high, medium and low grade land in the 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 2003 state average for all grades of land was estimated to be $2,275 per acre.
2.2 The increase in the state value was $192 per acre from 2002.
2.3 The percentage increase was 9.2 percent from 2002. December 11, 2003

3.0 Analysis by Crop Reporting District.

3.1 The highest land values were reported for East Central Iowa, $2,715 per acre.
3.2 The lowest land values were estimated for South Central Iowa, $1,354 per acre.
3.3 The greatest percentage increase was in South Central Iowa, 11.8 percent.
3.4 The smallest percentage increase was in North Central Iowa, 6.2 percent.

4.0 Analysis by Counties.

4.1 The highest value was estimated for Scott County, $3,697 per acre.
4.2 The lowest value was in Decatur County, $936 per acre.
4.3 The greatest dollar increase was $354 in Webster County.
4.4 The greatest percentage increase was 15.2 percent reported in Appanoose County.

5.0 Analysis by Quality of Land.

5.1 Low grade land in the state averaged $1,463 per acre and showed a 10.7 percent increase or $141 per acre.
5.2 Medium grade land averaged $2,123 per acre and showed a 10.3 percent increase or $199 per acre.
5.3 High grade land averaged $2,790 per acre and showed an increase of 8.3 percent or $214 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 6 positive factors listed by over 10 percent of the respondents.
6.2 Lower interest rates were the most frequently listed positive factor identified by 48 percent of the respondents.
6.3 Other positive factors were: strong investment demand (17 percent), scarcity of listings (15 percent), government payments (12 percent), improving commodity prices (11 percent), and better than expected corn yields (11 percent).
6.4 There were two negative factors listed by more than 10 percent of the respondents. Weather and uncertainty in general were listed by 13 percent of the respondents. Poor soybean yields were specifically listed by 12 percent of the respondents.

7.0 Number of Sales Compared to Previous Year.

When asked to compare the number of sales in 2003 relative to 2002, 26 percent reported more, 52 percent the same, and 22 percent reported less.

8.0 Land Sales by Buyer Category.

The 2003 survey asked respondents what percent of the land sales were sold to four categories of buyers.

8.1 The majority of farmland sales: 59 percent were to existing farmers. Investors represented 34 percent of the sales. New farmers represented 3 percent of the sales and, other purchases were 4 percent of sales.
8.2 Sales to existing farmers by Crop Reporting Districts ranged from 79 percent in North Central to 39 percent in South Central.
8.3 Sales to investors were highest in South Central (46 percent). North Central reported the lowest investor activity (21 percent).

9.0 Interpretation of Survey Results.

The results of this year’s survey show that the interest in Iowa farmland remains high. This year’s average value of $2,275 is the highest ever recorded in Iowa, beating the previous 1981 high of $2,147. When the land values are adjusted for inflation, using 1982 – 1984 time period, land values in Iowa peaked in 1979. The value reported in this year’s survey, when adjusted for inflation, is roughly the same as the value reported in 1973, the first year of the rapid run up of land values in the 1970s.

The survey also showed that the strength in the land market was apparent throughout the state. Four of the nine crop reporting districts showed increases greater than 10 percent in the average value of farmland. The 2003 survey shows investor interest in purchasing farmland remained high. There
are many reasons for this including the low interest rates and the poor performance in the stock market.

It is also interesting to note that there was no real dominant negative factors as in years past. The respondents talked about factors that were more local in nature. The factors influencing the land market both positive and negative were very similar to the factors reported in last year’s survey.

The average 9.2 percent increase in land values appears slightly higher than other surveys of Iowa land values. It is important to remember the different time periods covered when comparing surveys. The Iowa State University survey reported here is an annual survey as of November 1, 2003. It is also interesting to note that the land market did appear to be strengthening throughout the year and this may explain why these results are slightly higher.

In our effort to make the survey as accurate as possible we asked the respondents to report on more than one county if they felt knowledgeable about more than one county. This approach helped increase the total number of observations and will hopefully improve the estimates provided here. Overall we continue to have a high percentage of repeat respondents which helps to improve the continuity from year to year. This year 82 percent of the respondents had provided estimates in previous years.

Table 1. Recent Changes in Iowa Farmland Values

Table 2. Average Value Per Acre of Iowa Farmland Listed by Crop Reporting Districts and Grades of Land