Farmland values are up 17% in Iowa.
The Iowa State Land Value Survey was released Dec. 13, showing that average farmland values in Iowa are $11,411 per acre as of Nov. 1, 2022, up $1,660 from last year.
“This is phenomenal because last year Iowa farmland values rose 29% already, so this is a ramp up we haven’t seen since the 1980s,” said Wendong Zhang, assistant professor at Cornell University and former associate professor at Iowa State University.
Zhang said high-quality ground saw an average increase of 16.8% statewide, with an average price of $13,817 per acre, while medium-quality ground rose 17.7% ($10,673) and low-quality ground rose 15.2% ($7,369). He noted that all counties in Iowa saw an increase of more than 9.8%, showing a more uniform increase around the state.
“We are at historical highs for many counties in Iowa in nominal values and even adjusting for inflation, adjusted values are up 8.6% as well,” Zhang said.
The 2022 prices are still higher than those seen in the previous peak in 2013 when adjusting for inflation, he said.
A change to this year’s survey was a new question on the perception of land values in Iowa. Zhang asked respondents to give an opinion on how they perceived land values in their counties, wondering if they are too low, just right or too high. He said 59% of respondents said land values are currently too high, while 12% are saying they are “way too high.”
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“For landowners this is a significant appreciation of asset values, but there is growing concern about the sustainability of the land market and also the elevated entry barriers for beginning farmers,” Zhang said.
Breaking the figures into districts, Western Iowa saw the largest increases. Northwest Iowa had the largest increase in land values, increasing by 22.3%, led by a 24.2% increase in medium- quality ground. Southwest Iowa saw a land value increase of 22.2%, with a 21.2% increase in high-quality land.
Southeast Iowa showed the smallest increase in the state at 9.8%, with medium-quality land only rising by 6.2%.
Zhang said the major factors leading to increased land values are higher commodity prices, limited land supply and previously low interest rates. There is also more potential demand from farmers as chip shortages have limited part and equipment availability. Zhang said this has allowed farmers to put more money into potential land acquisition.
Looking forward, respondents said rising interest rates and higher input costs are the biggest negative factors affecting Iowa’s farmland market.
“As for when interest rates will affect the land market, typically there is some delay,” he said. “When we show a rise in interest rates in 2022, we will feel the effects of that surge next year. Typically there is a 12- to 18-month delay.”
He noted that 81% of Iowa’s land is owned debt-free, which limits some of the impact of interest rates.
The Iowa State Land Value Survey is an expert opinion survey, running since 1941. Zhang noted this should not be designed to value individual parcels, but rather use appraisers or comparable sales for values.