Record Sales for Land Prices

February 8, 2022
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As prices for everything continue to rise, land prices are no exception. In the fall of 2021, land prices hit a record high, and auctioneers expect prices to stay strong through planting season. To understand the price projections for 2022, one must first look at the reflection of 2021 and the record sales from the fall.

Reflection of Land Sales in 2021
Iowa State University completed a land survey study in 2021. While this survey only considers land in Iowa, it is a reflection of land prices in general across the midwest. From November 2020 to November 2021, according to the study, land prices increased by 29%. While some may think it is normal for prices to increase each year, the 2019-2020 increase was only 3%.

The high prices are not stopping people from buying land. Auctioneers are actually seeing more land sales than ever before. For example, according to Elizabeth Williams of the Progressive Farmer, “People’s Company, based in Clive, Iowa, has seen a 50% to 60% increase over last year in the total number of farm auctions it conducts in nine states.” Farmers are purchasing more land due to their yields in 2021 being better than expected. They are optimistic about yields in 2022 and want more land.

Record Sales
The 29% increase in land prices is obviously an average; the record land sales are much higher than that.

“79.6 acres sold privately in the summer of 2020 for $8,464 per acre. The same farm then sold at auction in late October 2021 for $13,100 per acre, a 54% jump in value.” Williams said.

This example is showing how much the price changed over just one year. The record sale for 2021, however, goes to land sold privately in Johnston County, Farm Journal Ag Web’s Tyne Morgan, “brought a record $26,000 per acre.” This is over twice the amount of the
54% jump.

While this record sale is impressive, another sale in October of 2021 gained interest for unique reasons. In Dickinson County, IA, 640 acres were sold for $14,000 per acre. Although this is only half the record price, it’s getting attention because land rarely sells in a whole section like this. The buyer ended up saving $32,000 in the end due to the land being offered at privilege. It seems both sellers and buyers are getting what they want in this market. As stated, auctioneers expect prices to stay steady or even continue
to rise.

Projections for 2022
Real estate values in the corn belt of the midwest are increasing more than those in the east. Right now, the prices are high and so is the demand, but if farm income begins to decline or interest rates increase, the land values could bottom out. As with everything in agriculture, we won’t know what will happen until farmers can determine their yield. If interest rates continue to rise, it affects the ability to borrow the money needed to purchase the land, which makes other investments like property, buildings, and machinery more attractive to buyers.

The interest rates, farmer incomes, and land availability have created a perfect storm of land sales, but this won’t last forever. “The land market can’t continue to run at the same volume pace as the last two quarters in 2021,” Williams said. Obviously, nobody can predict what will happen or when the market will change, but it is definitely on the horizon.