Rural, Farm and Ranch Land Values

Increased acreage planting flexibility granted through the last three farm bills has allowed agricultural producers to make production choices without government programs driving their decisions. Planted acre data for program crops in seven Texas regions is used to describe producers’ responses to the increased flexibility.  More

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According to the USDA, rising crop values can result in higher potential income and will likely result in increased real estate loan demand in row crop producing regions. Nonreal estate agricultural loan demand is driven by investment in machinery, equipment, and grain storage facilities. High crop prices and increasing crop production may lead to a rise in operating loans as producers boost production expenses to maximize yields.

Farm business debt is anticipated to stand at about $228.0 billion by the end of 2008, up $8.0 billion from 2007 and a new record for the fourth consecutive year. Real estate debt is expected to rise to $120.8 billion, up 2.8 percent, while nonreal estate debt should be $107.2 billion, up 4.6 percent. Farm real estate debt is expected to account for 53.0 percent of total farm debt in 2008.

Expectations that nonreal estate debt will expand faster than real estate debt are based on reported high levels of demand for short-term financing of machinery, equipment, and storage facilities. Additionally, nonreal estate debt is expected to increase as production increases in response to those crops (corn/soybeans) associated with ethanol production.

Farm mortgage debt is expected to rise about 2.8 percent in 2008. From the beginning of 2003 through the end of 2008, total farm debt is expected to have risen by about $52.8 billion, or more than 30 percent.

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According the USDA Farmland and building values (dollars per acre) of farm businesses rose by about 13.3 percent in 2007 and are expected to grow by nearly 14.9 percent in 2008. This solid growth in farm real estate asset values is partly due to rising returns on farm assets and to declines in interest rates. Rising income expectations translate into higher farmland values—in most regions, double-digit gains for cropland are expected. Gains in ranchland value are driven by demands from recreational and developmental uses. Demand for farmland for recreation and nonfarm development will continue to exert upward pressure on U.S. farmland values, especially in urban and urbanizing areas.

New housing starts are one of the leading indicators for the economy in general. The current drop in new housing starts may dampen the demand for real estate assets (including farm business real estate assets). However, so far the sluggish growth in the U.S. housing sector and decreasing demand for new housing in the economy at large have not significantly affected the demand for farmland investments.

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According to the USDA, Farm business asset, debt, and equity values are expected to continue rising through the end of 2008. Growth in farm asset and debt values reflect farm investor and lender expectations about the long-term profitability of farm sector investments.

The value of U.S. farm business assets is forecast to increase by about 13.1 percent in 2008 (see table). The value of farm business real estate assets, which comprise about 85 percent of farm sector assets, is expected to rise by 14.9 percent, following a 13.7-percent gain in 2007. (See glossary for definitions of terms.)

The value of year-end 2008 crop inventories is expected to rise slightly (up 0.7 percent) from 2007 while the value of livestock and poultry inventories is expected to fall slightly (down 0.1 percent). The value of machinery and motor vehicles is expected to rise by about 2.3 percent in 2008, based on higher expected sales. The value of purchased inputs held in onfarm inventory is expected to increase by about 6.6 percent in 2008 and the value of financial assets is expected to rise about 5.1 percent.

Iowa farmland prices have increased by an average of 18% during the last 12 months, according to the latest survey by the Iowa Farm Realtors Land Institute. The survey of farm real estate brokers was conducted around March 1 and results released March 19.
The survey shows an average increase of 11% for the six month period September 2007 to March 2008. “When that 11% is combined with the 7.1% increase we reported back in September, it shows a statewide average increase of 18.1% for the year from March 1, 2007 to March 1, 2008,” says Troy Louwagie, who helps compile the twice per year survey.

Louwagie, who coordinates the survey, is a realtor with Hertz Real Estate Services at Mt. Vernon. “These results show continuing strength in Iowa’s farmland market,” he says. “This was the highest dollar per acre number we’ve ever had, the second highest six-month gain and the third highest annual increase over the last 30 years since the survey began.”

While these are averages for the whole state, there are some individual sales of the highest quality farmland that have sold for as much as $7,000 to $9,000 per acre in the last month or so in Iowa.

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CONCORD – A move to create a new property-tax break for farmers ran into criticism in a Senate hearing.

The House passed the bill easily, with a two-thirds majority in February, despite concerns by the New Hampshire Municipal Association.

In a Senate Public and Municipal Committee hearing, NHMA ran through a list of problems it sees with the bill, HB 1442. The committee plans to continue the hearing later this month.

The bill would allow voters in a town to exempt the land beneath farm buildings from being assessed a view factor, commonly called the view tax, and would instead tax it under the current use program. Farm buildings, such as barns and sheds, would be taxed at their replacement value, not their fair market value.

State law now says that land under and around buildings cannot be put in current use, which can greatly reduce taxes on land of 10 acres or more.

Assessors say they have no choice under existing law but to apply view factors to properties that have buildings on them.

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The preservation plan, which would place the orchard under a conservation easement and manage it through a system of shareholders, now includes a 22-acre parcel on the west side of Gould Hill Road in Hopkinton. The project’s organizers say the land is important to the project for financial and symbolic reasons: It includes the pick-your-own area of the orchard, the land that visitors are most familiar with and that commands the most dramatic views.

Previously, the land under discussion was limited to a 58-acre parcel on the east side of the road that includes the white farmhouse, sales barn, orchard land and woods.

“The vision we’ve been talking about depends on the west side land,” said Susan Zankel, a member of Hopkinton’s Open Space Committee. “The farm will be most valuable if you have both sides of the road.”

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 The land auction held at the Lake County Courthouse ran aground Tuesday afternoon when the principal buyer of the property near Lake Madison learned that the asking price had doubled since his last meeting with the county commission.

Chuck Sutton, a local auctioneer working for the county, had opened the bidding for 9.93 acres between SD-19 and Lake Madison at $112,000, the average of three estimates performed to determine the land’s value. The auction — held in the commissioners’ meeting room for about a dozen people — soon closed when Sutton did not receive any bids for land that was previously declared as surplus.

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ASFMRA Accredited Real Property Review Appraisers are needed when:

• Real property is being purchased, sold, or tradedReal estate planning is being conducted
• Real estate taxes are increasing
• Land could be placed under a conservation easement with tax credit
• Divorce proceedings have rendered two conflicting values
• A partnership or entity is being divided
• Condemnation actions is taken against a property
• An owner does not know how to select the appropriate appraiser