2005 IOWA LAND VALUE SURVEY: OVERVIEW

Prepared by Michael D. Duffy, agricultural extension economist, and Darnell Smith, research associate, Iowa State University, December 13, 2005.

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 1,100 surveys are mailed each year. Normally 500-600 completed surveys are returned.

1.4 Respondents were asked to report on more than one county if they were knowledgeable about the land markets. The 2005 survey is based on 483 usable responses providing estimates on 615 county land values.

1.5 Participants in the survey are asked to estimate the value of high, medium and low grade land in their 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 2005 state average for all grades of land was estimated to be $2,914 per acre.

2.2     The increase in the state value was $285 per acre from 2004.

2.3     The percentage increase was 10.8 percent from 2004.

3.0 Analysis by Crop Reporting District.

3.1    The highest land values were reported for Central Iowa, $3,415 per acre.

3.2    The lowest land values were estimated for South Central Iowa, $1,793 per acre.

3.3    The greatest percentage increase was in South Central Iowa, 15.9 percent.

3.4    The least percentage increase was in Southeast Iowa, 8.6 percent.

4.0 Analysis by Counties.

4.1     The highest value was estimated for Scott county, $4,707 per acre.

4.2     The lowest value was in Decatur county, $1,321 per acre.

4.3     The greatest dollar increase was $540 in Scott county.

4.4     The greatest percentage increase was 24.3 percent reported in Ringgold county.

5.0 Analysis by Quality of Land.

5.1     Low grade land in the state averaged $1,961 per acre and showed a 14.5 percent increase or $248 per acre.

5.2     Medium grade land averaged $2,736 per acre and showed a 11.4 percent increase or $279 per acre.

5.3     High grade land averaged $3,511 per acre and showed an increase of 10.0 percent or $318 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 5 positive factors listed by over 10 percent of the respondents.

6.2     Low interest rates (27 percent) and good crop yields (26 percent) were the most frequently mentioned positive factors.

6.3     Other positive factors were: tax free exchanges (20 percent), government programs and payments (16 percent), and strong investment demand (12 percent).

6.4       There were 3 negative factors listed by more than 10 percent of the respondents. Lower grain prices were listed by 28 percent of the respondents. High input, machinery and low profitability in general (16 percent) and up trending interest rates (16 percent).

7.0 Number of Sales Compared to Previous Year.

When asked to compare the number of sales in 2005 relative to 2004, 29 percent reported more, 48 percent the same, and 23 percent reported less

8.0 Land Sales by Buyer Category.

The 2005 survey asked respondents what percent of the land sales were sold to four categories of buyers.

8.1     The majority of farmland sales: 56 percent were to existing farmers. Investors represented 39 percent of the sales. New farmers represented 3 percent of the sales and, other purchases were 2 percent of sales.

8.2     Sales to existing farmers by Crop Reporting Districts ranged from 81 percent in East Central to 46 percent in Southwest.

8.3     Sales to investors were highest in Northwest (51 percent). East Central reported the lowest investor activity (17 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 $2,914 is the highest ever recorded in Iowa. This is the third year in a row with a record high. 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 increase in land values in the 1970s.

The survey also showed that the strength in the land market was apparent throughout the state. All 9 crop reporting districts showed increases in the average value of close to 10 percent. All counties showed an increase in value. There were 21 counties with an increase less than 10 percent.

The 2005 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.

The statewide average 10.8 percent increase in land values is similar to 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, 2005.

Iowa farmland has performed very well since 2000. The statewide average land values have increased 56.9 percent over the past 5 years. The South Central Crop Reporting District increased over 80 percent since 2000. The Central district showed the highest dollar increase ($1,220 per acre) since 2000. The South Central district reported a $801 increase. There were 7 counties that increased over 70 percent during the same time period.

Are Iowa land values at their peak? Is the market too high? These are frequently asked questions that cannot be answered from the survey nor with any certainty. It does appear from the survey, however, that these concerns are on people’s minds. When you combine several of the similar negative factors mentioned, well over a fourth of the respondents are concerned that the market is too high for profitable farm production. There is also a considerable degree of uncertainty expressed regarding farm programs, the general economy, fewer buyers, and interest rates.

Another frequently asked question is whether or not high land prices are a good thing. Obviously, the answer to this depends upon your point of view and whether you are an owner or a renter, or potential buyer. A couple of observations address this question. One is that rents have been increasing at a lower rate than land values over the past several years. Another observation is that much of Iowa’s land is owned by absentee landowners. Based on a 2002 survey, 45 percent of Iowa’s farmland was owned by people who did not live on a farm. Of this, 19 percent of Iowa’s farmland was owned by people who don’t even live in Iowa. This same survey showed that almost three-fourths of Iowa’s farmland was owned without debt. This is one indicator that the potential for significant land value declines is not as great today as in the early 1980s.

There are many questions pertaining to the record high land values. How you answer them depends on your point of view. The survey shows that land value increases appear to be slowing and that values may be nearing a plateau in the near future. Many respondents indicated that the supply of land on the market has increased and that the potential buyers may be hesitating to buy at these higher land prices. Time will tell.

 

Table 1. Recent Changes in Iowa Farmland Values

  Value Per Acre Dollar Change Percentage Change

1968

409

12

3.0

1969

419

10

2.5

1970

419

0

0.0

1971

430

11

2.6

1972

482

52

12.0

1973

635

154

31.9

1974

834

199

31.3

1975

1,095

261

31.3

1976

1,368

273

24.9

1977

1,450

82

6.0

1978

1,646

196

13.5

1979

1,958

312

19.0

1980

2,066

108

5.5

1981

2,147

82

3.9

1982

1,801

-346

-16.1

1983

1,691

-110

- 6.1

1984

1,357

-334

-19.8

1985

948

-409

-30.2

1986

787

-161

-17.0

1987

875

88

11.2

1988

1,054

179

20.4

1989

1,139

85

8.1

1990

1,214

75

6.6

1991

1,219

5

.4

1992

1,249

30

2.5

1993

1,275

26

2.1

1994

1,356

81

6.4

1995

1,455

99

7.3

1996

1,682

227

15.6

1997

1,837

155

9.2

1998

1,801

-36

-1.9

1999

1,781

-20

-1.1

2000

1,857

76

4.3

2001

1,926

69

3.7

2002

2,083

157

8.2

2003

2,275

192

9.2

2004

2,629

354

15.6

2005

2,914

285

10.8

 

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

Year 

State Average

Northwest 

North Central 

Northeast 

West Central

 

Central

East Central

Southwest 

South Central 

Southeast

 
All Grades

1981

2147

2562

2721

2227

2056

2538

2530

1586

1184

1790

1986

787

937

912

786

768

930

1000

607

403

705

1987

875

1084

1055

835

871

1044

1053

676

421

782

1995

1455

1755

1724

1330

1528

1766

1676

1102

742

1367

1996

1682

2071

1997

1559

1758

2090

1965

1206

851

1502

1997

1837

2263

2194

1721

1894

2295

2110

1369

957

1580

1998

1801

2174

2119

1757

1820

2192

2123

1373

948

1585

1999

1781

2059

2073

1807

1837

2128

2118

1346

981

1570

2000

1857

2198

2169

1868

1924

2195

2190

1412

992

1655

2001

1926

2240

2240

1950

1969

2246

2324

1511

1039

1705

2002

2083

2434

2367

2149

2101

2392

2547

1632

1211

1808

2003

2275

2683

2514

2347

2329

2652

2715

1774

1354

1979

2004

2629

3118

2913

2665

2728

3101

3054

2088

1547

2286

2005

2914

3393

3222

2963

3048

3415

3396

2350

1793

2483

 

High Grade

1981

2759

3035

3209

2885

2576

3061

3293

2050

1880

2726

1986

1048

1131

1094

1048

1000

1154

1343

832

682

1120

1987

1150

1306

1260

1102

1125

1288

1399

912

688

1229

1995

1869

2058

1968

1729

1939

2159

2131

1483

1163

2091

1996

2151

2431

2300

2015

2210

2558

2518

1586

1316

2291

1997

2328

2647

2531

2210

2350

2790

2673

1786

1443

2383

1998

2284

2534

2449

2238

2268

2659

2683

1798

1455

2369

1999

2249

2401

2362

2275

2288

2589

2685

1773

1499

2271

2000

2324

2547

2462

2329

2375

2660

2743

1825

1509

2353

2001

2407

2588

2546

2439

2437

2685

2907

1947

1582

2447

2002

2576

2776

2676

2625

2583

2848

3105

2117

1931

2539

2003

2790

3040

2817

2857

2820

3121

3263

2285

2121

2783

2004

3193

3537

3265

3189

3264

3621

3659

2657

2358

3174

2005

3511

3813

3588

3522

3691

3935

4069

2925

2659

3385

 

Medium Grade

1981

1931

2252

2334

2052

1866

2279

2258

1472

1149

1604

1986

699

830

777

709

684

813

866

561

396

622

1987

780

957

903

754

776

928

925

630

413

696

1995

1322

1598

1558

1216

1394

1580

1510

1009

726

1210

1996

1514

1873

1769

1423

1585

1843

1752

1111

829

1321

1997

1668

2033

1945

1577

1742

2050

1910

1280

945

1404

1998

1638

1970

1885

1604

1670

1968

1930

1274

924

1414

1999

1629

1876

1869

1665

1692

1898

1945

1241

949

1433

2000

1701

2001

1972

1728

1772

1956

1996

1320

955

1511

2001

1768

2057

2040

1800

1807

2013

2125

1410

1004

1571

2002

1924

2278

2142

2010

1930

2175

2358

1522

1152

1659

2003

2123

2507

2309

2221

2167

2438

2543

1659

1307

1834

2004

2457

2930

2669

2515

2564

2858

2863

1956

1492

2118

2005

2736

3199

2982

2834

2833

3165

3172

2217

1725

2347

 

Low Grade

1981

1157

1460

1517

1220

1125

1336

1366

959

624

752

1986

377

488

468

405

350

475

460

290

176

257

1987

432

571

553

444

419

535

495

341

207

289

1995

792

992

1049

737

812

967

925

614

400

574

1996

936

1213

1207

878

981

1146

1073

688

479

674

1997

1042

1354

1337

992

1083

1279

1186

787

544

730

1998

1030

1299

1286

1059

1021

1258

1205

792

542

739

1999

1045

1216

1314

1110

1040

1296

1188

798

582

790

2000

1117

1370

1387

1167

1126

1299

1288

862

597

875

2001

1170

1388

1423

1208

1202

1416

1404

918

623

871

2002

1322

1571

1568

1448

1332

1516

1628

996

760

997

2003

1463

1808

1682

1512

1500

1707

1811

1130

858

1063

2004

1713

2087

1976

1816

1746

2028

1998

1354

1029

1272

2005

1961

2382

2252

2032

1970

2353

2237

1614

1252

1438

 

Level of Sales Activity, 2005

Crop Reporting District

More

Same

Less 

Percent

Northwest

23

56

22

North Central

34

44

21

Northeast

24

43

34

West Central

27

49

24

Central

32

49

19

East Central

35

43

22

Southwest

35

43

22

South Central

21

55

24

Southeast

34

46

20

State

29

48

23

 

Iowa Land Purchases, 2005

 

Existing Farmers

Investors

New Farmers

Other

Percent

Northwest

49

51

0

0

North Central

53

39

7

1

Northeast

58

31

6

6

West Central

65

34

1

0

Central

52

46

2

1

East Central

81

17

0

2

Southwest

46

48

3

3

South Central

49

47

3

2

Southeast

57

37

2

4

  State

56

39

3

2

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