2018 showed a healthy market for land, despite a mild decline in sale prices.
Farmland values decreased 2.5% overall, with the decline taking place in the first half of the year. Strong demand kept values for high-quality land stable, minimizing a slight decline in values for medium-quality land, and a larger drop for low-quality land.
Land values declined as increased negative factors entered the market. Excess rainfall from planting season through harvest caused reduced to significantly reduced yields in southern Minnesota and northern Iowa. Low commodity prices continued, the Fed raised the discount rate four times throughout the year, and retaliatory tariffs were imposed. Farmers’ attitudes became justifiably cautious.
Landowners settling estates continue to be the primary land sellers. Estate land sales increased noticeably over 2017 and these sellers stated family dynamics and passings, not future pricing fears, as their motivators. We were pleased to see sales coming from positions of financial stability, as only three of our overall sales were debt-driven. If current negative forces continue to affect the agricultural sector, however, we may see a slight increase in debt-driven sales this year.
Buyer interest, while cautious, remained strong despite 2018’s headwinds. While we had over 90 landowners who felt it was in their best interest to sell, we had over 90 farmers and investors who felt land was a good investment for their future and made the purchase. Expansion farmers were the buyers in 69% of our sales. Investors were the other 31%, continuing recent trends.
Sale prices varied considerably, based on location and resource type. The same quality of land could see a $1,000 per acre price differential depending on the neighborhood or community where it was located. Land with gravel or sand resources is in particularly high demand due to the expanding urban economy, with high prices reflecting minimal supply of these parcels.
Overall, 2018 revealed the strength of the land market. There were many reasons for negativity, with issues both home and abroad. Still, sellers and buyers came together in great numbers and shook hands with confidence.
We hope this information is helpful to you. Please contact us if you have any questions or if we can be of further service. Call toll free at 1-800-730-5263 (LAND), reach us by email, visit our website, or find us on Facebook. We look forward to working with you.