farmland prices in 2015
by Mason Spurgeon, Certified General Real Estate Appraiser
I am often asked "what are land prices doing?" and I respond with "it depends on the type of property you are talking about." This is a very difficult question to answer in general terms due to the many different factors in the market for different types of land and their locations.
In completing this market study, I used our internal database of extensive sales data to perform an analysis between 2014 and 2015 sales. This is a very difficult task to perform because of the lack of true resales, the same property selling each year without being altered in any way. This is the only true way to tell if the market has changed, but these types of sales are very rare, so appraisers are forced to compare similar sales to determine if there is a difference in land values from one year to the next.
I have analyzed sales in Hancock County, Illinois, and Lewis County, Missouri. These two counties were used because of their location and amount of sales data, still a very limited amount but much better than other counties throughout the area. Between 2013 and 2014 there was a sharp decline in the total number of sales in these counties. However, between 2014 and 2015 the number of sales were similar. The supply of market sales did not increase or decrease between 2014 and 2015.
In completing my analysis, I started by breaking all of the sales into categories based on their percentage open and county. Then I averaged all of the prices for the different land categories and the total land prices for all of the farms.
My findings after analyzing these two markets was very interesting. According to the sales data it appears that the results are mixed. In both counties it appears that farms that are highly tillable appeared to have stayed stable, but in Lewis County less tillable tracts appear to have fallen slightly and in Hancock County they increased. However, these conclusions were drawn with very limited sales data, much less than would be ideal for this type of study; also, this data was taken from all areas of the county, and it is based on averages. Averages are very dangerous in the appraisal world and should be used with caution.
As for the reason for the highly tillable tracts being stable in both Missouri and Illinois, this maybe because of commodity prices. Farmers are waiting to see what prices are going to do before investing large amounts of cash. On the other hand, the reason for the increase and/or decrease in less open tracts are unknown exactly. There are many different speculations as to why the farming market changes over time and between states, and frankly this newsletter would not be long enough to explain every aspect. All of these points could be debated for hours.
In conclusion, I have not seen a large change in the farm real estate market in our area. Sure there are sales of properties that appear to be below market, and some that are at the upper end of the market, but overall, the market appears to be stable, despite the significant drop in the stock market and commodity prices. It appears that the real estate market is still being propped up by the low interest rates and the lack of a better investment. Where else can a person get a decent return on their investment and have a tangible asset that doesn’t depreciate? Land has always been a good investment, when held for a long period of time, and it appears to still be a good investment. Mark Twain said it best, “Buy land, they’re not making it anymore.”
Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.
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