2008 IOWA LAND VALUE SURVEY: OVERVIEW
Prepared by Michael D. Duffy, agricultural extension economist, and Darnell Smith, extension associate, Iowa State University, December 16, 2008.
(This document also is available as a Microsoft Word file.)
1.0 History and Purpose of the Land Value Survey.
2.0 Analysis by State.
3.0 Analysis by Crop Reporting District.
4.0 Analysis by Counties.
5.0 Analysis by Quality of Land.
6.0 Major Factors Influencing the Real Estate Market.
7.0 Number of Sales Compared to Previous Year.
When asked to compare the number of sales in 2008 relative to 2007, 38 percent reported more, 37 percent the same, and 25 percent reported less.
8.0 Land Sales by Buyer Category.
The 2008 survey asked respondents what percent of the land sales were sold to four categories of buyers.
9.0 Interpretation of the Survey Results
It is important to remember the time period when interpreting the 2008 survey results. The Iowa State University survey covers the time period from November 2007 to November 2008. This is important to remember because there have been considerable changes in the situation in Iowa over the past few months. Monthly average corn and soybean prices in Iowa had been continually rising until July of 2008. Corn averaged $5.41 per bushel in July and current prices are below $3.00. Soybeans averaged $13.10 in July and the current prices are below $8.00 per bushel. This change in revenue has been acompanied by substantial increases in the costs of production, especially for fertilizers and seed.
The lower grain prices and higher costs of production mean lower net revenue per acre that ultimately would imply moderation in land value. As one survey respondent reported; “… the farmland market, after having had a substantial run over the past several years, the uptrend is appearing to be wearing thin. The recent declines in the grain market appear to be having a direct impact on values…”.
A softening of the land market can be inferred by comparing the results of the ISU survey to other surveys of Iowa farmland values. The Realtors Land Institute, which does a semi-annual survey, reported a 6.6 percent increase in values from March to September and an 11 percent increase from September 2007 to March 2008. This would be a 17.6 percent increase from September to September. The 7th District of the Federal Reserve Board reported a 2 percent quarterly increase from July to October and a 17 percent increase in Iowa land values from October to October.
It is important to keep these caveats in mind but, nonetheless, the ISU survey did show considerable strength in Iowa farmland. The $4,468 average value was the sixth straight year of record average land values. Land values have almost doubled since 2003, going from $2,275 to $4,468 in just 5 years.
In 2008, three counties averaged over $6,000 per acre. This is the first time any county has averaged over that amount. Similarly 2008 marked the first time that no county has averaged below $2,000 per acre.
There were also some notable changes in other categories from the 2008 survey. East Central reported a significant decrease in the amount of sales activities. Almost half, 44 percent, of the respondents from the East Central crop reporting district reported less sales relative to the same time period from a year ago. This is a reflection of the flooding and other hardships suffered in this area over the past year. South Central Iowa also reported a significant decline in sales, 43 percent reported less sales. This perhaps reflects the relatively soft demand for recreational land.
There was a marked increase in the amount of purchases by farmers and a marked decrease in the purchases by the investor category. These trends started a few years ago and reflect the relative strength of the farm economy and farmers tendency to convert profits into farmland. In North Central Iowa investors dropped from 39 to 26 percent of the purchases but purchases in the “Other” category increased from 1 to 12 percent. The ISU survey is an opinion survey so this may reflect different perceptions but it could represent the increase in purchases for energy purposes. In North Central, less than one-fourth of the respondents to this year’s survey were new.
Iowa farmland is not immune from the current financial situation in the United States and around the world. Exports still make up a sizeable portion of the demand for our grain. In addition, international competition for inputs is strong and having a significant impact on prices. How the current financial situation will play out and over what time period still remains unclear. Regardless there will be impacts on Iowa farmland values.
It is fortunate that today a considerable amount of Iowa’s farmland is held without debt. A recently released survey on Iowa farmland ownership showed that 75 percent of the land was debt free. Debt has been used for recent sales but an estimated fourth of the purchases were essentially without debt.
Another factor further clouding the future with respect to Iowa farmland values is the aging farmland owner. Recent estimates show that over half, 55 percent, of the farmland is owned by people over the age of 65. Approximately 10 percent of the farmland, 1 in 10 acres, is owned by a single female over the age of 75. This means there will be a considerable amount of farmland changing ownership over the next several years. Although most people indicated the higher land values had not changed their plans it remains to be seen if the same will be true in the new environment.
So what does all this mean for Iowa farmland values? To be sure the future is very uncertain. We have seen events over the past few months that are unprecedented and make predictions
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
Level of Sales Activity, 2008
Iowa Land Purchases, 2008
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