Iowa farmland values soar again to average $8,690 an acre

The value of an average acre of Iowa farmland rose 9.4 percent since last September to $8,690 per acre, according to a new survey by the Iowa chapter of the Realtors Land Institute.

On a year-over-year basis, an average acre of Iowa farmland rose 17.1 percent in value from March 1, 2012, to March 1 of this year.

The average price of an acre of "unimproved" Iowa farmland - land that is tillable but has nothing planted on it - has more than doubled from the $4,208 per acre average recorded in 2008.

The average price of tillable farmland on March 1 ranged from a low of $5,928 an acre in south central Iowa to $10,415 an acre in northwest Iowa. Northeast Iowa recorded the largest percentage change in farmland values over the last six months with a 12.6 percent increase.

High quality Iowa farmland is averaging $11,515 per acre, up from $10,524 in September. The land is classified by  potential corn production.

East central Iowa, which includes Linn and Johnson counties, experienced a 10.4 percent increase to an average $8,520 per acre. High quality crop land is selling for an average $11,469 per acre, up from $10,456 on Sept. 1.

Troy Louwagie of Hertz Farm Management in Mount Vernon attributed the continued rise in average farmland values to several factors, including strong commodity prices, low long term interest rates and limited amount of land offered for sale.

"We had a lot of land sales late in the fall as people were concerned about the fiscal cliff and potential adverse tax changes," Louwagie said. "After Congress acted in early January and the tax changes weren't as severe and in some cases were beneficial, we saw land sales pick up.

"In fact, we've seen some really strong sales over the last three months."

Congress elected to retain the $5 million threshold in net worth before estate taxes are imposed, continuing favorable tax treatment for the sale of farmland.

Louwagie said a lack of stable alternative investments and fear of inflation also is driving farmland sale prices. He said concerns that could affect farmland values in the future include higher seed and fertilizer costs, an increase in interest rates, larger amounts of land being offered for sale, and uncertainty about the U.S. and world economy.

"We're still seeing 80 percent of the people buying farmland are farmers," Louwagie said. "The number of investors bidding on farmland seems to have subsided in recent sales."

Survey participants were asked to estimate the average value of farmland as of March 1. The estimates are for bare, unimproved land with a sale price on a cash basis.