Iowa Farmland Market Update
Iowa Farmland Market Report
January seemed to decline in farmland value and number of farm sales, however February blew it out of the water. The market is surprisingly hot, hot, hot! We watched land sale results from all over the state come in with phenomenal figures. A sale in Sioux county reach $18,360/acre, which marks the highest selling farmland in 2018 thus far. In central Iowa we saw most of the sales of good tillable farmland yield over $10,000 per acre with many bringing in closer to the $11,500 range. This made for a successful February. Over all, trends are on the rise for good quality farms. I always say, “Good ground sells good!”
There are more farms coming to the market in March and April as we approach planting season. There is new interest from investor buyers and investment
groups that are bidding the price up at auction. They are now competing against the neighbor farmer who ultimately becomes the unchallenged bidder and thus
becomes the buyer. Interest for recreational ground is also on the rise this month. We have been receiving calls from out of state investors who would like to look at
recreational ground during their stay in Iowa for the Iowa Deer Classic.
A good appraiser friend of mine Jim Rothermitch and I get asked this question a lot lately: “How can land prices be so high with commodity prices being so low.” A very good question. Here is what we say, “Buying farmland has never made sense the day you buy it. Owning land is a multi generational investment. Here is an example of what I mean. A 110 acre Delaware County farm was auctioned in November 2017 for $9,000/acre. According to the realtor, the family purchased 120 acres in 1950 for $175/acre which included a house and farm outbuildings. The family sold off 10 acres which included the farmstead about 10 years ago for an undisclosed amount. For simplicity, let’s say this was a 110 acre farm bought in 1950 for $175/acre. Thus, over a 67 year period, the value of this farm grew from $175/acre to $9,000/acre. This indicates 6.06% compounded appreciation per year. Add 3% for annual return that equates to a little over 9% per year. This is a conservative return as it does not include the sale of the 10-acre farmstead. This is what land buyers want, an investment with a low amount of risk with a good return. I am sure the day the family bought this farm in 1950 they thought they paid “way too much” and the neighbors thought they will never pay for that farm. Almost 7 decades later, this was likely the best investment the family ever made. ” So there is your answer as to why land prices remain stubbornly high with low commodity prices.
David Whitaker | Iowa Land Guy
More about Jim; click here