2009 IOWA LAND VALUE SURVEY:  OVERVIEW

Prepared by Michael D. Duffy, agricultural extension economist, Iowa State University, December 16, 2009.

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

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 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.

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. Typically 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 2009 survey is based on 457 usable responses providing 571 county land values estimates.

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 2009 state average for all grades of land was estimated to be $4,371 per acre.

2.2 The decrease in the state value was $97 per acre from 2008.

2.3 The percentage decrease was 2.2 percent from 2008.

3.0 Analysis by Crop Reporting District.

3.1 The highest land values were reported for Northwest Iowa, $5,364 per acre.

3.2 The lowest land values were estimated for South Central Iowa, $2,537 per acre.

3.3 The only percentage increase was in East Central Iowa, 1.1 percent.

3.4 The largest percentage decrease was in Central Iowa, 4.8 percent.

4.0 Analysis by Counties.

4.1 The highest value was estimated for Scott county, $6,361 per acre.

4.2 The lowest value was in Decatur county, $1,957 per acre.

4.3 The greatest dollar increase was $237 in Lyon county. The highest percentage increase was in Allamakee county, 5.7 percent.

4.4 The greatest percentage and dollar decrease was 6.6 percent and $384 reported in Black Hawk county.

5.0 Analysis by Quality of Land.

5.1 Low grade land in the state averaged $2,884 per acre and showed a 2.8 percent decrease or ($83) per acre.

5.2 Medium grade land averaged $4,076 per acre and showed a 2.8 percent decrease or ($119) per acre.

5.3 High grade land averaged $5,321 per acre and showed a decrease of 1.1 percent or ($60) 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 4 positive factors listed by over 10 percent of the respondents.

6.2 Low interest rates were the most frequently mentioned positive factor, being mentioned by 45 percent of the respondents. The second most frequently mentioned factor was high commodity prices, mentioned by 30 percent of the respondents. High yields were mentioned by 24 percent of the respondents, and a limited supply of land available for sale was mentioned by 20 percent of the respondents as having a positive impact on land values.

6.3 There were 5 negative factors listed by more than 10 percent of the respondents. The first three factors were identical to the top negative factors from a year ago. Declining grain prices, high input costs and the poor general economy were listed by 42, 35, and 34 percent of the respondents, respectively. The livestock losses of the past year were listed by 23 percent of the respondents and the weather was listed by 10 percent of the respondents as having a negative impact on land values in 2009.

7.0 Number of Sales Compared to Previous Year.

When asked to compare the number of sales in 2009 relative to 2008, 9 percent reported more, 29 percent the same, and 62 percent reported less.

8.0 Land Sales by Buyer Category.

The 2009 survey asked respondents what percent of the land sales were sold to four categories of buyers.

8.1 The majority of farmland sales, 72 percent, were to existing farmers. Investors represented 23 percent of the sales. New farmers represented 4 percent of the sales, and other purchasers were 2 percent of sales.

8.2 Sales to existing farmers by Crop Reporting Districts ranged from 81 percent in West Central to 62 percent in South Central.

8.3 Sales to investors were highest in South Central (32 percent). West Central reported the lowest investor activity (15 percent).

9.0 Interpretation of the Survey Results.

It is important to remember the time period when interpreting the 2009 survey results. The Iowa State University survey covers the time period from November 2008 to November 2009. Commodity prices have shown considerable swings over the past few years and the costs of production have shown wider ranges than is normal. When there is such a high degree of volatility, land value changes can vary depending on the period covered.

The Realtors Land Institute, which does a semi-annual survey, reported a 7.6 percent decrease in values from September 2008 to March 2009. However, they reported only a 1.9 percent decrease from March 2009 to September 2009. The 7th District of the Federal Reserve Board reported a 4 percent quarterly increase from July to October but a 7 percent decrease in Iowa land values from October 2008 to October 2009.

The decrease reported in the 2009 ISU survey is the first reported decline in land values since 1999. The 2009 results also mark the first time since 2004 that Iowa land values have not increased by double digits.

Not all Iowa counties experienced a decrease in value during 2009. There were 14 counties who were either unchanged or up slightly.

The change in Iowa land values is not surprising given the relative changes in crop values Iowa has experienced. The value of corn production in Iowa increased 64 percent from 2006 to 2007, but decreased 15 percent from 2007 to 2008 based on the year end summaries by the USDA. Soybeans had a 40 percent increase in the crop value from 2006 to 2007 but a 9 percent decrease in value from 2007 to 2008. We don’t know for certain the revenue for 2009 but based on prices and the difficult harvest it will probably be lower than 2008.

The percentage of respondents who reported fewer sales in 2009 relative to 2008 was the highest recorded. This was remarkable not only because of the relative value but also because of the amount of increase. In 2008, 24 percent of the respondents reported fewer sales than in 2007, but in 2009, 62 percent of the respondents reported fewer sales than in 2008. One of the respondents noted that they had one-half the number of sales.

It is difficult to say which is the cause and which is the effect when considering lower returns and fewer sales and the impact on land values. There are correlations and during 2009 the Iowa land market was impacted by both of these factors.

There appears to be a demand for the higher quality land but less so for the lower quality land. Last year was the first time we had any counties average over $6,000 per acre and the same 3 counties did so again in 2009. All counties averaged over $2,000 per acre in 2008 but in 2009 there was one county below this level. The high quality land was down only 1.1 percent whereas the medium and low quality land was down 2.8 percent.

The East Central crop reporting district was the main area showing a positive increase relative to last year. This could be due to the recovery from the flood. Other counties with a positive increase were along the Mississippi River. It should be noted that the 2008 values for four counties were revised. Adams, Adair, Clark and Taylor counties had a slight adjustment.

There was a slight increase in the amount of land purchases by existing farmers and a corresponding decrease in 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. How long this trend continues remains to be seen.

The Iowa farmland market this past year can be summarized as one in which there was a marked decrease in sales activity. The demand for the higher quality land was greater than the demand for lower quality land. It was interesting this year because some people said the demand for recreational land was still very strong, others said that it was almost non-existent and others said there just wasn’t any recreational type land available.

The decrease in land values appears to have stopped. There is some indication that the values are starting to increase but it is doubtful there will be any major changes without significant changes in the overall situation. The condition of the U.S. and world economies, the returns to livestock producers, interest rates, oil prices and a myriad of other factors could come into play with respect to the change in land values. The situation has stabilized but for how long is unknown. In another survey a Nebraska lender commented, “Market is considered steady until we see an indication of change.” That sounds like a pretty obvious statement but it pretty much characterizes the Iowa land market situation today.

Table 1. Recent Changes in Iowa Farmland Values

Iowa Land Purchases, 2009

Iowa Average Land Values

Percentage Change in Iowa Average Land Values

Inflation Adjusted Iowa Average Land Values in 2009 Dollars

Percent Change in Inflation Adjusted Iowa Average Land Values

Purchasers of Iowa Farmland by Year

Level of Sales Activity Relative to Previous Year

Return to Land Value Survey Home Page