Iowa State University Extension

2006 IOWA LAND VALUE SURVEY:  OVERVIEW

Prepared by Michael D. Duffy, agricultural extension economist and Darnell Smith, extension associate, Iowa State University, December 19, 2006.

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 2006 survey is based on 490 usable responses providing estimates on 623 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 2006 state average for all grades of land was estimated to be $3,204 per acre.

2.2    The increase in the state value was $290 per acre from 2005.

2.3    The percentage increase was 10 percent from 2005.

3.0     Analysis by Crop Reporting District.

3.1    The highest land values were reported for Northwest, $3,783 per acre.

3.2    The lowest land values were estimated for South Central Iowa, $1,927 per acre.

3.3    The greatest percentage increase was in Southeast Iowa, 14.7  percent.

3.4    The least percentage increase was in South Central Iowa, 7.5 percent.

4.0     Analysis by Counties.

4.1    The highest value was estimated for Scott county, $5,073 per acre.

4.2    The lowest value was in Decatur county, $1,465 per acre.

4.3    The greatest dollar increase was $495 in Louisa county.

4.4    The greatest percentage increase was 17.2 percent reported in Audubon county.

5.0     Analysis by Quality of Land.

5.1    Low grade land in the state averaged $2,195 per acre and showed a 11.9 percent increase or $234 per acre.

5.2    Medium grade land averaged $3,011 per acre and showed a 10.1 percent increase or $275 per acre.

5.3    High grade land averaged $3,835 per acre and showed an increase of 9.2 percent or $324 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 six positive factors listed by more than10 percent of the respondents.

6.2    Good grain prices was by far the most frequently mentioned positive factor, being mentioned by 42 percent of the respondents.

6.3    Other positive factors were: good yields (18 percent); low interest rates, 1031 tax exchanges and bio-fuel demand (14 percent) and scarcity of listings (13 percent).

6.4   There were 3 negative factors listed by more than 10 percent of the respondents.  The up trending interest rates were listed by 22 percent of the respondents.  High input, machinery and low profitability in general (12 percent) and land prices too high (11 percent).

7.0     Number of Sales Compared to Previous Year.

When asked to compare the number of sales in 2006 relative to 2005, 26 percent reported more, 51 percent the same, and 23 percent reported less.

8.0     Land Sales by Buyer Category.

The 2006 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 35 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 75 percent in Northwest to 39 percent in South Central.

8.3    Sales to investors were highest in South Central (56 percent).  Northwest reported the lowest investor activity (23 percent).

9.0     Interpretation of Survey Results.

The 2006 survey marks the fourth straight year that Iowa land values have set a record high.  For the first time a county average value was more than $5,000 per acre.  Almost all counties and crop reporting districts showed considerable strength.  Nearly half (45 percent) of the counties showed increases of more than 10 percent and 52 percent of the counties showed increases of between 5 and 10 percent.  In 2006, seven counties had average values over $4,000 per acre.  This compares to just one county last year.  There were 59 counties with values between $3,000 and $4,000 per acre, compared to 51 last year. 

The results of this year’s survey are notable not just for the relative strength and record values reported.  There was a wide variation among the respondents with respect to the percent change in land values.  Also, the ISU survey showed considerable differences from the other surveys of Iowa land values.

The majority of the increase in value appears to have occurred in just the past few months.  Other surveys of Iowa land values indicated the increase in value would have only been about one-half of the value reported in this year’s survey if trends had continued.  For example, in September of this year the Realtors Land Institute reported an increase of just 2.9 percent from March through September.   The Chicago Federal Reserve Board in the November AgLetter reported that their survey, as of Oct. 1, “provided evidence of cooling after two years of double-digit gains in farmland value.”   They went on to further report that only a fourth of the lenders felt land values would increase in the fourth quarter and that “71 percent forecasted stable values.”  Part of the difference between the AgLetter report and the ISU survey is due to the different areas covered.  The AgLetter encompasses the entire Seventh Federal Reserve District.  The timing of the survey, however, appears to represent a large part of the difference in the two surveys.

The AgLetter reported Iowa land values had only gained an estimated one percent for the third quarter of the year and just five percent for the year from October 2005 to October 2006.  It is interesting to note the first half of the ISU survey respondents reported a 9.8 percent whereas the second half of the respondents reported a 12.2 percent increase.

The turnaround in land value increases can be traced to the rapid increases in grain prices.  Almost half of the survey respondents identified favorable grain prices as a positive factor and another 14 percent credited the bioeconomy which, at this time, is primarily corn based.  The change in corn prices is very clear.  The average corn price for Iowa, as reported by the USDA, was $2.07 per bushel for the period from January to October.  Today the cash corn prices are well over $3.00 and it is possible to forward price corn for the next couple of years for that price. Soybean prices have moved similar to corn over the past few months.  The January to October average Iowa price was $5.34 per bushel and the price today is over $6.20 per bushel.

The change in the demand for corn is having far reaching impacts on Iowa agriculture.  Land values and rents are increasing.  We are seeing basis changes.  The demand for corn for ethanol is changing the relative county prices for corn.  There are impacts and implications for the export market and on the livestock sector.  There will be a shift in the rotation followed on many farms. 

Another change that occurred is who is buying Iowa farmland.  For the past several years the trend has been towards more investor purchases and less farmer purchases.  This year’s survey shows a reversal of that trend.  In this year’s survey the percent of land being purchased by existing farmers increased from 56 to 60 percent while the percent being purchased by investors decreased from 39 to 35 percent.

The increases in Iowa land values over the past few years raised the question about whether or not the land market was overheated and “were we setting ourselves up for another fall.”   The double digit increase for the third year in a row continues to raise those questions although many are saying that the new bioeconomy demand represents a permanent change in demand and that the land values will increase to reflect this new demand and income potential.

A new question being raised is whether or not we are entering a time similar to the early 1970s.  There are several important differences to keep in mind when pondering that question.  Iowa land values increased over 30 percent per year for 1973, 1974 and 1975.  The current increases in values are no where near that level.  The boom in the values in the early 1970s followed a period of relative stability in Iowa land values.  The increases we are seeing today are coming at a time when Iowa land values have been increasing fairly steadily over the past several years.  Since 2000 Iowa land values have increased $1,347 per acre on average or a 73 percent increase. This is a substantial increase, to be sure, but it is no where near the over 125 percent increase in values from 1972 to 1975.  There are other differences such as the level of inflation, the fact that the more land is held without debt and the fact that more land is being held by older people.

Is the increase in prices and income per acre permanent?  Will a 3.5 percent capitalization rate be acceptable in the future?  How will the livestock sector react to the higher prices and the availability of alternative feeds?  How will the export market react, not only to the higher prices but other world events?  What does it mean to have corn prices tied to the price of oil?  What are the environmental impacts of changing rotations?  Finally, what are the impacts of these prices on beginning farmers? 

The list of questions could go on and, unfortunately there aren’t good answers readily available.  This all leads to the high level of uncertainty with respect to what will happen with Iowa land values and where we are headed. 

 

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

 

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

2006

3204

3783

3478

3187

3410

3716

3725

2580

1927

2849

 

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

2006

3835

4261

3834

3816

4072

4263

4443

3209

2663

3793

 

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

2006

3011

3561

3223

2987

3213

3458

3501

2442

1866

2679

 

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

2006

2195

2566

2500

2248

2293

2615

2505

1729

1373

1786

 

Level of Sales Activity, 2006

Crop Reporting District

More

Same

Less 

Percent

Northwest

31

52

17

North Central

38

48

15

Northeast

18

59

23

West Central

21

46

33

Central

38

47

15

East Central

20

51

29

Southwest

13

60

27

South Central

22

41

37

Southeast

29

60

12

State

26

51

23

 

Iowa Land Purchases, 2006

 

Existing Farmers

Investors

New Farmers

Other

Percent

Northwest

75

23

0

2

North Central

57

39

3

1

Northeast

68

25

4

3

West Central

69

27

1

3

Central

51

45

4

0

East Central

61

34

1

4

Southwest

53

44

2

1

South Central

39

56

2

3

Southeast

68

24

5

3

  State

60

35

3

2

         

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