Is the Land Value Bubble Ready to
Burst?
"The land market throughout the western Cornbelt
high plains continues to be very strong, with no let up in demand", according
to Monty Meusch, Area Sales Manager in
Omaha, Nebraska, with Farmers National Company. "Demand is strongest for
the better-quality cropland and rangeland throughout the area."
Meusch went on to say that
the strong grain and livestock markets, coupled with favorable interest rates
for land loans, have helped keep buyer interest strong. Today the majority of
buyers in the market are still active farmers and ranchers. However, we are
seeing an increasing interest coming from land investors who are looking at
land as an alternative investment because of the enthusiasm for agriculture
throughout the marketplace as well as the good returns they can receive on
land. The volatility of the stock market and low interest rates in the bond
market have kept that investor interest alive.
Meusch indicated land
values are very strong. "Top quality farmland in western Iowa, southeast South
Dakota, eastern Nebraska, and northern Kansas is now selling at a range of
$2,000 to $6,000 per acre, depending on the property's location and production
capabilities as well as water availability. Good to excellent pasture and range
units in these same areas will run in value from $600 to $1,500 an acre."
If you are interested in
learning more about the value of your farm in western Iowa, southeast South
Dakota, eastern Nebraska, and northern Kansas, please give Monty Meusch in
Omaha, a call at 1-800-346-2650 or email mmeusch@farmersnational.com.
Moving further west in the Farmers National Company
service area, we visited with J. D.
Maxson, Area Sales Manager for the company in North Platte, Nebraska. "Demand
for good grassland or tillable farms remain strong in west-central Nebraska,
the Panhandle of Nebraska, eastern Colorado, Wyoming, and southern South Dakota,"
according to Maxson. He went on to say, "Livestock producers are starting to
feel some stress due to rising feed costs; however, the USDA helped ease some
concern when they announced changes to the Conservation Reserve Program (CRP)
policy, which will allow grazing or haying of 24 million acres this year. CRP
contract holders have started signing up for the new stipulation and should
help curb costs and drive animal numbers, which will have a positive affect on
the land market."
Maxson characterized some
factors that will have an affect on the land market in the long term, including
a projected increase in the capital gains tax from 15% to as high as 30%,
depending on who wins the White House this fall. Also, the ethanol industry
continues to receive negative publicity in the press, and that coupled with
heavy rains and continued flooding in the Midwest, will have an affect on grain
prices and subsequently cash flow for farm operators. However, Maxson reports
that there's still optimism in the farm and ranch real estate market. Local
owner-operators are continuing to buy additional acres and they are the bulk of
the market. There are more investors coming into the land market as well,
helping keep the prices high.
In Maxson's area, he's
seen an increase of 10% to 12% in real estate prices over the last year. He is
optimistic that land values will remain strong for the balance of the year, as
it continues to be a seller's market with more buyers than there is land for
sale.
If you are interested in
learning more about the value of your farm in west-central Nebraska, the
Panhandle of Nebraska, eastern Colorado, Wyoming, and southern South Dakota,
please give J. D. Maxson in North Platte, a call at (308) 532-6813 or email
jmaxson@farmersnational.com.
Moving over to the north-central region for Farmers
National Company, the Area Sales
Manager, Sam Kain, in Des Moines, Iowa, reports very strong land values
throughout Iowa, southern Minnesota, eastern North Dakota, and even northern
Missouri. "Iowa has been the epicenter of the ethanol industry for several
years and has led the way in increasing land values and demand to buy more land,"
according to Kain. "We have had record real estate sales in Iowa over the last
24 months and record auction business. We had a couple of stretches over the
last 12 months where we've had nearly one auction a day for several weeks in a
row. The demand to buy remains very strong and there are still more buyers than
sellers in the market."
To reflect the market,
Kain listed a few current sales, including:
80 acres in Grundy
County, Iowa, recently sold for $7,200 per acre
150 acres in Floyd County, Iowa, sold for $5,760 per acre
147 acres in Hardin County, Iowa, sold for $6,050 an acre
230 acres in Crawford County, Iowa, sold for $5, 375 per
acre
Things that are on the
horizon that we need to watch, according to Kain, including the floods
throughout Iowa and the Midwest and how they might affect land buyers'
interest. However, the current rise in commodity prices may offset any concern
over the flooding. Also, the negative publicity about ethanol is something to
watch. Current changes in the government Farm Program so far have had little
affect on land values, but a change in capital gains rates, depending on who
ends up in the White House this fall, could have greater implications.
All-in-all, Kain remains very optimistic about the land market at this time.
If you are interested in
learning more about the value of your farm in Iowa, southern Minnesota, eastern
North Dakota, and northern Missouri, please give Sam Kain, Area Sales Manager,
in Des Moines, a call at 1-800-798-4509 or email skain@farmersnational.com.
Moving to the eastern area, we visited with Farmers
National Company's Area Sales Manager,
Roger Hayworth, in Oxford, Indiana. Consistent with other areas throughout
our service area, Hayworth reports more buyers than sellers currently in the
marketplace, which has led to continued high demand and high land prices. "In
2007, the number of sales started out slowly, especially during the summer
months. As we got closer to harvest and confirmed the good-to-excellent yields
with strong grain prices, we saw a sharp increase in land values and more
farmland became available for sale during the last quarter of the year,"
according to Hayworth.
There remain fewer 1031
buyers in the marketplace in the eastern area, which is a big change from 2005
and 2006. At that time, the tax-deferred 1031 land buyers made up over 50% of
the market in the area. Hayworth reports that there has been little or no land
sold for residential development recently.
The hardest thing in
today's market, according to Hayworth, is determining a fair market value. The
market is moving so fast and with some disparity from region to region
throughout the eastern area, auctions have become the method of choice for
selling property. At the day of the auction, a fair market price is determined,
if the auction has been set up well and advertised properly. As a company,
Farmers National Company saw another increase in the number of auctions in
2007, hosting over 200 auctions last year.
"Demand for recreational
property seems to have leveled off and is not as strong as it was in 2005 and
2006. Land values seem to be leveling off, reaching some sort of a limit, in my
opinion," according to Hayworth.
In closing, Hayworth felt
very positive about the market as we look to the balance of 2008. He went on to
quote some current sales in the area:
277 acres in Champaign County, Illinois, sold for $15,250
per acre
199 acres in Medina County, Ohio, sold for $5,728 per acre
327.39 acres in Montgomery County, Illinois, sold for
$3,536 per acre
105.7 acres in Cass County, Indiana, sold for $3,330 per
acre
If you are interested in
learning more about the value of your farm in Illinois, Indiana, or Ohio,
please give Roger Hayworth, Area Sales Manager, in Oxford, Indiana, a call at
1-888-673-4919 or email rhayworth@farmersnational.com.
If you are interested in
learning more about the value of your farm, please give the professionals at
Farmers National Company a call. Please call Lee Vermeer, Ray Preston, or Monty
Meusch in Omaha, at 1-800-346-2650, or J. D. Maxson in North Platte, at
308-532-6813, Sam Kain in Des Moines, at 1-800-798-4509, or Roger Hayworth in
Oxford, at 1-888-673-4919. Or feel free to email our representatives as
follows:
Lee
Vermeer: lvermeer@farmersnational.com
Ray
Preston: rpreston@farmersnational.com
Monty
Meusch: mmeusch@farmersnational.com
JD
Maxson: jmaxson@farmersnational.com
Sam
Kain: skain@farmersnational.com
Roger
Hayworth: rhayworth@farmersnational.com
