Iowa State University Extension

2007 IOWA LAND VALUE SURVEY:  OVERVIEW

Prepared by Michael D. Duffy, agricultural extension economist, and Darnell Smith, extension associate, Iowa State University, December 18, 2007.

(This document also is available as a Microsoft Word file.)

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 2007 survey is based on 499 usable responses providing estimates on 668 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 2007 state average for all grades of land was estimated to be $3,908 per acre.

2.2    The increase in the state value was $704 per acre from 2006.

2.3    The percentage increase was 22 percent from 2006.

3.0     Analysis by Crop Reporting District.

3.1    The highest land values were reported for Northwest, $4,699 per acre.

3.2    The lowest land values were estimated for South Central Iowa, $2,325 per acre.

3.3    The greatest percentage increase was in North Central Iowa, 25.3  percent.

3.4    The least percentage increase was in East Central Iowa, 14.7 percent.

4.0     Analysis by Counties.

4.1    The highest value was estimated for Scott county, $5,699 per acre.

4.2    The lowest value was in Decatur county, $1,828 per acre.

4.3    The greatest dollar increase was $1,142 in Sioux county.

4.4    The greatest percentage increase was 30.3 percent reported in Floyd county.

5.0     Analysis by Quality of Land.

5.1    Low grade land in the state averaged $2,655 per acre and showed a 21 percent increase or $460 per acre.

5.2    Medium grade land averaged $3,666 per acre and showed a 21.8 percent increase or $655 per acre.

5.3    High grade land averaged $4,686 per acre and showed an increase of 22.2 percent or $851 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 2 positive factors listed by over 10 percent of the respondents.

6.2    Good grain prices was by far the most frequently mentioned positive factor, being mentioned by 35 percent of the respondents.  Low interest rates were mentioned by 10 percent of the respondents.

6.3   There were 3 negative factors listed by more than 10 percent of the respondents.  High input costs were listed by 25 percent of the respondents.  Land prices too high was listed by (12 percent) and a concern over how long it would last was listed by 11 percent of the respondents.

7.0     Number of Sales Compared to Previous Year.

When asked to compare the number of sales in 2007 relative to 2006, 37 percent reported more, 42 percent the same, and 21 percent reported less.

8.0     Land Sales by Buyer Category.

The 2007 survey asked respondents what percent of the land sales were sold to four categories of buyers.

8.1    The majority of farmland sales: 60 percent were to existing farmers.  Investors represented 34 percent of the sales.  New farmers represented 2 percent of the sales and, other purchases were 4 percent of sales.

8.2    Sales to existing farmers by Crop Reporting Districts ranged from 71 percent in West Central to 40 percent in South Central.

8.3    Sales to investors were highest in South Central (48 percent).  Northeast reported the lowest investor activity (27 percent).

9.0    Interpretation of the Survey Results

The 2007 survey shows the biofuel related land boom is continuing.  This year’s 22 percent increase is the largest yearly percentage increase since 1976.  The $704 increase is the highest dollar increase ever recorded.

The 2007 Iowa average land values set a record high for the fifth straight year.  Since 2000 average Iowa land values have increased by $2,051 per acre, more than a 100 percent increase over the 2000 average value of $1,857.   In just the past 5 years Iowa average land values have increased by over 70 percent.

Last year when this survey was conducted, in November, land values were just starting to rise due to the higher grain prices.  As a result there was a difference between the Iowa State University values and other Iowa land value surveys.  This year, however, the results reported here are similar to other surveys.  The Federal Reserve Board reported a 21 percent rise in Iowa land values from October to October.  The Realtors Land Institute reported a 20 percent increase from September to September.

The increases in values were evidenced across the state.  Five Iowa counties had average values over $5,000 per acre and over half the counties, 51 percent, had average land values between $5,000 and $4,000 per acre.  

The percentage increases in values was similar to the dollar increases.  Almost a fifth, 19, of the counties reported increases over 25 percent and over half, (59 percent) of the counties reported increases between 20 and 25 percent.
One observation is that the percentage increases in values were not as strong in the counties and crop reporting districts along the rivers.  This reflects the recent, relative changes in the crop price basis that have occurred in Iowa.  The river counties used to have the narrowest basis between local and gulf port corn prices due to transportation costs.  Now, however, with more localized demand from the ethanol plants the differences in basis has shifted.

The respondents to the 2007 survey indicated that biofuel demand and related ramifications are the driver in the increase in land values.  Higher grain prices and overall agricultural outlook were mentioned by over half the respondents as positive factors. 

There were two specific concerns identified by the respondents.  The first focused on the current land values and how long this can last.  The second major concern was over increases in input costs.  Farmers have seen an increase in profits but the higher land values and rents, coupled with higher seed and fertilizer prices have dampened the profit potential considerably with increased cash flow requirements.

Comments received on some of the surveys reveal a difference of opinion with respect to the current situation and how long it might last.  Some expressed a great deal of concern that the land values were too high and that the market might be due for a correction.  On the other hand some said the naysayers were overreacting and that the market was continuing to show strength with significant interest. 

Regardless of the point of view it is an exciting time in agriculture especially with respect to the land market.  This year 37 percent of the respondents reported more sales than last year.  This is the highest percentage reporting more year-to-year sales since 1988, when we were just starting to come out of the farm financial crisis. 

We are seeing more sales at auction.  One appraiser jokingly said he estimated the land value using the income appraisal method and then added $1,000.  He went on to say, however, that their recent appraisal approach was to use auction sales to let the market determine land values.  There have been reports that some auctions were terminated because the minimum price was not met but recent auction reports indicate there is still a strong market.

Many respondents reported more existing farmers were purchasing land.  However, the percentages of purchases by existing farmers and investors were essentially unchanged from a year ago.  Overall, 60 percent of the purchasers were reported to be existing farmers and 34 percent were reported to be investors.  Farmer purchases have been on a steady downtrend.  A decade ago existing farmers represented almost three-fourths of the purchases.  Existing farmers as a percentage of purchasers reached a low of just 56 percent in 2005.

So where do we go from here?  A farmer, after he had attended a recent auction, commented there were a thousand different economies when it came to the agricultural land market.   He was spot on with that comment.  Each person is different, each financial situation is different and everyone views the world from their own perspective.  

Will the land market crash?  How high will land go?  How can anyone afford to pay that much for the land?  Have we really entered a new golden era that will finally give agriculture lasting profits?  What will be the impact of a weakening dollar, of the new farm bill, of the subprime mortgage debacle? 

These are just some of the questions.  There are as many different answers as there are people answering them. 

My general feeling is that the land market will remain strong for at least the next five years.  We have seen a fundamental shift in demand for corn due to ethanol production.  I don’t think this demand will diminish in the near future.  Will ethanol be able to move from being an additive to a substitute fuel is a question?  There are technologies being developed to use alternative sources for ethanol.  But, most of these would involve using the same land that is being used for corn, so, even if the alternative sources do become commercialized, the demand for the land will remain strong.  What will have a negative impact will be if the new generation ethanol (or whatever fuel it may be) is developed from something other than the agricultural products we do or could produce.

Additionally, the farm bill is a major uncertainty at this time.  Corn and soybean prices have moved beyond the level of support that came with previous farm bills but the provisions of the farm bill will still influence agriculture and land values.

The overall strength of the economy and the full impact of the subprime situation could have spillover effects in the agricultural land market.  This is especially true with respect to recreational demand. 

The international situation will also have an impact on agricultural land values.  This is especially true with respect to petroleum.  We have developed an agriculture that is dependent upon fossil fuels.  As the price of these fuels continues to rise, so too will the costs of production.  Increasing costs of production was identified as the number one negative factor facing the land market.  Rising fuel prices and the subsequent increases in related input prices (fertilizers and pesticides) could significantly cut profit margins which will negatively impact land values.

The value of the dollar and international production will also impact Iowa land values.  Changes in production anywhere in the world will affect price changes in Iowa.  The shift to ethanol has not removed us from the vagrancy of the international markets.

The world of agriculture as we know it here in Iowa has changed.  Where the changes will settle out and when is not known.  In the meantime there are new opportunities for people.  With opportunities come challenges.  Some will make money and some won’t.  There truly are a thousand different economies when it comes to the agricultural land market.

 

 

 

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

2006

3,204

290

10.0

2007 3,908 704 22.0

 

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 C entral

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

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

2006

3204

3783

3478

3187

3410

3716

3725

2580

1927

2849

2007

3908

4699

4356

4055

4033

4529

4272

3209

2325

3463

 

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

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

2006

3835

4261

3834

3816

4072

4263

4443

3209

2663

3793

2007

4686

5313

4807

4859

4804

5261

5073

3989

3231

4625

 

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

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

2006

3011

3561

3223

2987

3213

3458

3501

2442

1866

2679

2007

3667

4385

4026

3777

3796

4194

4005

3047

2296

3270

 

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

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

2006

2195

2566

2500

2248

2293

2615

2505

1729

1373

1786

2007

2656

3210

3125

2853

2738

3004

2928

2175

1583

2131

 

Level of Sales Activity, 2007

Crop Reporting District

More

Same

Less  

Percent

Northwest

46

43

11

North Central

57

30

13

Northeast

26

55

19

West Central

37

39

24

Central

51

30

19

East Central

30

44

26

Southwest

23

50

27

South Central

27

44

29

Southeast

21

46

33

State

37

42

21

Iowa Land Purchases, 2007

 

Existing Farmers

Investors

New Farmers

Other

Percent

Northwest

67

28

2

4

North Central

58

39

2

1

Northeast

62

27

2

9

West Central

71

27

1

1

Central

70

29

1

0

East Central

54

37

2

7

Southwest

61

38

1

0

South Central

40

48

4

8

Southeast

62

31

2

5

  State

60

34

2

4

         
Iowa Average Land Values
Percentage Change in Iowa Average Land Values
Inflation Adjusted Iowa Average Land Values
Percentage Change in Inflation Adjusted Iowa Average Land Values
Iowa Average Corn Gross Revenue Per Acre
Inflation Adjusted Corn Gross Revenue per Acre
Purchasers of Iowa Farmland
Level of Sales Activity Relative to Previous Year

 

 

 

 

 

 

 

 

 

 

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