Also, with the country struggling, IOWA is booming because of gambling and farming...........
Iowa Farmland Values Up 17.6 Percent from September 2007
Tue Sep 16, 2008 06:30 PM CDT
DES MOINES -- Iowa farmland values are still growing, but the rate of increase has slowed down slightly. The Iowa Farm and Land Chapter of the REALTORS Land Institute reports average cropland values rose 6.6 percent in six months between March and September 2008. The annual increase from Sept. 2007 to Sept. 2008 was 17.6 percent. That’s the fourth highest annual increase since the survey began in 1978.
Three Iowa crop-reporting districts had top-quality farmland sell for more than $6,000 per acre. The highest was west-central Iowa with $6,193 per acre for high quality cropland, followed by northeast Iowa at $6,071 per acre and central Iowa with $6,016 per acre for top land.
”Traditionally, east-central Iowa has had the highest-priced farmland, but with the late spring and flooding problems, farmers there were reluctant bidders this summer,” said Troy Louwagie with Hertz Real Estate Services in Mount Vernon, Iowa. Farmland in that district posted the smallest six-month increase of only 2.7 percent.
“The survey participants expect land values to stay strong if commodity prices stay high,” said Louwagie.
Roger Johnson, with Farmers National Company in Cedar Falls, agreed. “We’re seeing farms being bought with profits made over the past three years.”
"It used to be retired farmers would sell their farm and move to town. Now, they’re moving to town and they’re continuing to buy land and paying cash for it,” said Lyle Hansen with Southwest Iowa Real Estate Company in Audubon, Iowa. “A lot of buyers are 70 to 80 years old.”
While realtors are optimistic about future sales, a few cracks start to show in the land market. “We’re seeing a lot more volatility in auction sales than in years past. It just depends on who wants to buy the farm,” said Louwagie. “Also, decreasing returns in the livestock industry will likely slow sales in livestock areas that have been highly competitive in the past couple years.”
There is also more land coming up for sale. Landowners look at farmland values, which have appreciated 70 percent in the last five years, and worry about an increase in capital gains tax with a new administration. The current 15 percent capital gains tax rate is scheduled to sunset in 2010, Louwagie said.
If commodity prices stay strong, farmers will continue to want to buy land, said Louwagie, but “if corn and soybean prices drop back 20 percent, we could see farmland values level off.”
In other land, realtors report a reduced demand by outside investors for recreational land for hunting and discounts for CRP land that has five to eight years left on its CRP contract.
Survey participants included specialists in farm and land sales, management and appraisal.
At the informal press conference, the realtors were asked about cash rent. Loyd Brown, president of Hertz Farm Management in Nevada, Iowa, said that $250 to $350 per acre was the going rate for high-quality land.
Garner, Iowa, farmland broker Vern Prohaska reported he had talked with a landowner recently who was offered $400 per acre by a big farmer, and his current tenant had offered $325. But the landowner rejected the large farmer’s bid and even questioned his current tenant’s bid.
He told Prohaska the $325 offer was too much. “I don’t know what they’ll settle on. Some of these retired farmer landowners feel like $200 per acre is plenty for rent, and they want to keep their tenants in business. It’s not that important to them to get top dollar.”
The farmland brokers and farm managers reported that cash rents are still the most popular rental arrangement on Iowa farms, although interest has increased in flex, or modified, cash rents.