Midwest Land Values Continue Impressive Rally
Average price increase 11% over the past 12 months.
Compiled by staff
Published: Dec 21, 2005
Farmland values across the Midwest states of Illinois, Indiana, Iowa, Michigan and Wisconsin continued their impressive rally, rising an average 11% for the 12 months through September.
On a year-to-date basis, Midwest land values are up 8% through this year's first three quarters, slightly off the 9% pace reported by the Chicago Federal Reserve survey for last year's comparable period.
While land values continue to rise, agricultural bankers polled by the Chicago Fed have begun fretting over weakening credit conditions. They predict that farmer demand for acquiring additional land will ease in the fourth quarter, especially in Illinois.
The survey doesn't report on the region's hottest market: Chicago collar counties Cook, McHenry, Lake, Kane and Will, as well as adjoining counties Boone, DuPage and Kendall, where suburban sprawl and tax-deferred exchange purchases have pushed land values to speculative levels.
Bankers expect that exchange sales will continue to play a key role in bolstering land values. The latest Chicago Fed survey also shows a wider range of price appreciation across the five-state region. Indiana land values remained flat in the third quarter, while Wisconsin and Iowa land values rose 4%.
For the 12 months through September, Wisconsin farmland rose 14%, the region's biggest gain. In contrast, sluggish economic conditions and reduced residential development pressure in Michigan limited farm value gains to just 4% over the 12-month period—the five-state region's most modest gain.
Looking forward, almost two-thirds of bankers expect that farmland values will stabilize across the region in the fourth quarter. Bankers are most upbeat about Wisconsin, where 45% of bankers predict that land values will continue to climb through year end. Bankers are looking to non-farmer investors to bid up land prices even as some farmers back away from the market.
Indeed, 57% of bankers in the Chicago Fed survey predict that interest from non-farm investors will expand over the next three to six months. This view is strongest in Illinois, notes Chicago Fed economist David Oppedahl, where the summer drought cut crop yields and crimped farm income.
On balance, bankers across the five state region expect the volume of land sales to remain steady through winter. However, nearly 40% of Illinois bankers expect land sale volume to increase as landowners seek to lock in gains.
For more on the Chicago Fed's third-quarter land value survey, visit www.chicagofed.org/publications/agletter/november_2005.pdf.
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Tagged: land values, farm, Drought, crop yields, land prices
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