Iowa State University

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.

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 2008 survey is based on 479 usable responses providing estimates on 625 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 2008 state average for all grades of land was estimated to be $4,468 per acre.

2.2     The increase in the state value was $560 per acre from 2007.

2.3     The percentage increase was 14 percent from 2007.

3.0     Analysis by Crop Reporting District.

3.1     The highest land values were reported for Northwest, $5,395 per acre.

3.2     The lowest land values were estimated for South Central Iowa, $2,573 per acre.

3.3     The greatest percentage increase was in West Central Iowa, 19.6 percent.

3.4     The least percentage increase was in South Central Iowa, 10.7 percent.

4.0     Analysis by Counties.

4.1     The highest value was estimated for Scott county, $6,310 per acre.

4.2     The lowest value was in Decatur county, $2,002 per acre.

4.3     The greatest dollar increase was $891 in Sioux county.

4.4     The greatest percentage increase was 19.9 percent reported in Monona county.

5.0     Analysis by Quality of Land.

5.1     Low grade land in the state averaged $2,967 per acre and showed a 11.7 percent increase or $311 per acre.

5.2     Medium grade land averaged $4,195 per acre and showed a 14.4 percent increase or $528 per acre.

5.3     High grade land averaged $5,381 per acre and showed an increase of 14.8 percent or $695 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 34 percent of the respondents.  Low interest rates were mentioned by 14 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 24 percent of the respondents.  Declining grain prices were listed by 18 percent of the respondents and the poor general economy was listed by 14 percent of the respondents.

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.

8.1     The majority of farmland sales, 69 percent, were to existing farmers.  Investors represented 24 percent of the sales.  New farmers represented 3 percent of the sales and other purchasers were 4 percent of sales.

8.2     Sales to existing farmers by Crop Reporting Districts ranged from 83 percent in West Central to 55 percent in South Central and Southwest.

8.3     Sales to investors were highest in Southwest (38 percent).  West Central reported the lowest investor activity (13 percent).

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

  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
2008 4,468 560 14.3

 

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

2008
4468
5395
4950
4590
4823
5280
4743
3626
2573
3913

 

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

2008
5381
6150
5514
5415
5752
6076
5674
4642
3586
5346

 

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

2008
4195
5023
4568
4339
4537
4919
4405
3425
2527
3721

 

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

2008
2967
3580
3408
3296
3187
3469
3214
2298
1757
2271
 

Level of Sales Activity, 2008

Crop Reporting District

More

Same

Less  

Percent

Northwest

47

42

11

North Central

50

34

16

Northeast

39

42

19

West Central

37

43

21

Central

40

34

26

East Central

38

19

44

Southwest

27

44

29

South Central

18

39

43

Southeast

38

38

24

State

38

37

24

Iowa Land Purchases, 2008

 

Existing Farmers

Investors

New Farmers

Others

Percent

Northwest

74

21

4

3

North Central

62

26

0

12

Northeast

76

23

1

1

West Central

83

13

1

4

Central

65

32

3

0

East Central

76

20

4

0

Southwest

55

38

2

5

South Central

55

30

4

11

Southeast

73

17

6

4

  State

69

24

3

4

         
 
Average Values
Percentage Change
Inflation-Adjusted
Inflation Percentage
Farmland Buyers
Sales Activity
 

 

 

 

 

 

 

 

 

 

 

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