Iowa land values continue to decline
Annual ISU survey shows third consecutive year of dropping land prices
Initiated in 1941 and sponsored annually by Iowa State University, Dr. Wendong Zhang, released the 2016 ISU land survey in December 2016, at a press conference in Ames. What follows are highlights of that survey and press conference.
Background
Since 2014, the survey has been conducted by the Center for Agricultural and Rural Development in the Department of Economics at Iowa State University and Iowa State University Extension and Outreach.
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 a direct estimate for any particular piece of property.
The survey is based on reports by licensed real estate brokers, farm managers, appraisers, agricultural lenders, county assessors, and selected individuals considered to be knowledgeable of land market conditions. Respondents were asked to report for more than one county, if they were knowledgeable about the land markets. The 2016 survey is based on 518 usable respondents providing 711 county land values estimates.
Of the 518 respondents, 252 (49 percent) completed the survey online. Online responses allow participants to provide estimates for up to 15 counties. A new web portal has been developed this year to facilitate the visualization and analysis of Iowa farmland values by pooling data from ISU, USDA, Chicago Fed, and the Realtor Land Institute, as well as by making use of charts over time and interactive county maps. The portal can be accessed at www.card.iastate.edu/farmland/.
This survey is the only data source that provides an annual land value estimate at the county level for each of the 99 counties in Iowa. In addition, this survey provides estimates of high, medium, and low-quality land at the crop reporting districts and state level.
Results
The 2016 state average for all quality of land was estimated to be $7,183 per acre as of November 2016.
The state value decreased $450 per acre from November 2015.
The Iowa State University land value survey reported a 5.9 percent decrease to $7,183 in Iowa farmland values from November 2015 to November 2016. This represents a modest decline in Iowa farmland values, and reveals that land values have decreased three years in a row—the first time since the 1980s farm crisis. This unprecedented consecutive drop reminds many of the painful farm crisis in the mid-1980s. However, despite continued downward pressures on farm income and farmland prices, current Iowa farmland values are still more than double what they were 10 years ago, 64 percent higher than the 2009 values and seven percent higher than the 2011 values.
The 2016 ISU survey shows that all nine crop reporting districts and all 99 counties in Iowa reported a loss in average land values in 2016. The largest district-wide decrease in value was in West Central Iowa, which reported a drop of 8.7 percent, bringing farmland values there down to $7,358 per acre. The Northwest district, which reported an increase from November 2014 to 2015, also saw a 4.6 percent decline this year. This is largely driven by changes in the livestock industry—livestock producers braced for a tougher environment over last couple months and hog, livestock, and dairy prices have also dropped by more than 30 percent compared to two years ago. The smallest decrease was reported in the Southeast district, 2.6 percent, bringing values there to $6,716 per acre. Additionally, all 99 counties reported a drop in average land values this year, ranging from 8.4 percent in Monona County to 2.0 percent in Decatur, Appanoose, Wayne, and Lucas Counties.
This year’s survey also revealed different patterns in land values across different land quality classes: while state-average values for high-quality land decreased 5.9 percent, there was only a 3.5 percent decline for low-quality farmland values. In addition, low-quality land in the Southwest and South Central districts were the only areas to show an increase in average values, reporting gains of 2.9 and 5.2 percent, respectively. This is likely a combined result of strong recreational demand, higher government payments from conservation programs such as the Conserve Reserve Program (CRP), and limited land supply.
In general, the results from the 2016 Iowa State University land value survey echo results from other surveys. The Federal Reserve Bank of Chicago reported Iowa land values down five percent from October 2015 to October 2016. The same survey reported Iowa land values decreased by one percent from July to October, 2016, and a two percent increase in land values in southern Iowa from July to October 2016, which is consistent with the smaller decline in Southwest and South Central districts revealed by the 2016 ISU survey. The USDA reported Iowa farmland values down by 1.9 percent from June 2016 to June 2016. The Realtors Land Institute reported land values down 5.0 percent from September 2015 to March 2016 but only down 3.7 percent from March 2016 to September 2016.
New Survey features
A few of the highlights are: In addition to asking respondents about the buyers of farmland purchases, questions were added on who sells land. The majority of farmland sales, 53 percent, were from estate sales, followed by retired farmers at 23 percent.
Active farmers account for 12 percent, while investors only sold nine percent of farmland in Iowa.
Additionally, 74 percent of all farmland purchases were to existing farmers, of which existing local farmers and investors and new farmers account for another 22 and three percent, respectively. This suggests that Iowa farmland market is featured with “local farmers buying local land.”
Second, respondents were asked to predict how the land values and cash crop prices in their county would change in November 2017, 2018, and 2020. In general, respondents are expecting a slight improvement in the cash crop market: the expected cash corn and soybean prices for November 2018 are $3.60/bushel and $9.48/bushel, which is higher than current and expected November 2017 levels. Respondents also expect the land market to stabilize and even slightly increase next year, but the majority also forecasted a decrease from 2017 to 2018.
Third, this year’s survey asked about the number of years’ experience of respondents and number of counties they offer services in. Results show that agricultural professionals on average have over 20 years of experience in their current profession and offer service to an average of 10 counties.
Finally, to gauge how each respondent defined high, medium, and low-quality land for their county, the survey asked for estimated average CSR2 (Corn Suitability Rating) points and corn yields for all land quality classes. Results show respondents were defining high, medium, and low-quality based on relative conditions in their region. For example, the average CSR2 and corn yield for high-quality land in South Central was 68 points and 186 bushels/acre, which is lower than the CSR2 for medium-quality land in Northwest Iowa at 79 points and 191 bushels/acre.
