Iowa Land Values Jump to a Record High
The 2022 Iowa State Land Value Survey shows the average value of an acre of farmland in the state jumped 17%, or $1,660, to a record $11,411 per acre. When adjusting for inflation, the 2022 average value surpassed the previous inflation-adjusted record set in 2013. While inflation was a major factor that drove the increase last year, Wendong Zhang, an associate professor of economics and faculty affiliate of Center for Agricultural and Rural Development (CARD) at Iowa State University, said that it did not play as much of a factor as commodity prices, limited land supply and low interest rates through summer 2022.
Zhang, who is responsible for conducting the annual survey, said: “The Federal Reserve seems to be determined to keep raising interest rates until they get a firm control on inflation. This is a tricky balance because larger and quicker interest rate hikes run the risk of slowing down the economy, potentially to a recession.” While he noted higher interest rates put downward pressure on the land market, the effects typically don’t show up in land prices for one or two years. Plus, 81% of Iowa farmland is fully paid for, so the higher interest rates don’t always affect farmers’ land purchasing decisions. Furthermore, a significant portion of respondents said that cash on hand was a positive factor influencing land values. “Farmers have a lot more cash on hand and supply chain issues led to a shortage of equipment, so the money that farmers normally spend on equipment is now devoted to land,” Zhang said.
Some 70% of survey respondents feel that current land values are “too high” or “way too high.” Still, t 48% of respondents expect an increase in farmland values one year from now, while 24% anticipate no change and 28% expect lower values. Most respondents expect the one-year value to either be the same or increase roughly 5% to 10%. Looking five years ahead, 60% of respondents believe land values will increase 10% to 20% from current values, while about 24% forecast a decline in prices.
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