Agricultural Economics Department

 

Date of this Version

6-1988

Comments

Published by Department of Agricultural Economics, Report No. 159, June 1988. The website address is: http://www.agecon.unl.edu/realestate.html

The authors express their appreciation to the survey reporters for their participation in the annual Nebraska Farm Real Estate Market Survey. Without their input, much of the information within this report would not exist.

Abstract

Agricultural land values turned upward during 1987, after registering six successive years of decline. The University of Nebraska-Lincoln 1988 Farm

Real Estate Market Survey reported a 13 percent gain for the 12-month period

ending February 1, 1988. Increases were evident for virtually all types of agricultural land and in all areas of the state, although there was variation in magnitude among the substate regions.

The reversal of the long-term decline in agricultural land values stems primarily from improved farm income levels. Also, the preceding devaluation has positioned agricultural land values such that earnings have become more competitive with alternative investment opportunities. These factors, in combination with some carry-over demand from when the market was essentially dormant, have stirred buyer interest in recent months.

Obviously, a stronger agricultural land market has brought considerable and immediate financial relief to the farm sector. While improved income has strengthened debt-servicing capacity, the rise in farm real estate values has contributed to better collateral positions for thousands of farm owner­ operators across the state. Additionally, the "upbeat" nature of the market translates directly into increased asset liquidity - thereby facilitating financial restructuring via land liquidation.

Sales were reportedly up in 1987 after an extended period of abbreviated activity. While reporters estimated about half the sales were due to financial pressure, the incidence of stress-related activity was clearly down from the previous year. Reasons for purchase were perceived as being much

like those of earlier years, with expansion of operation continuing to be the

most frequently cited motive. There was some evidence that particular buyer interest existed in parcels enrolled in the long-term Conservation Reserve Program (CRP), although whether or not it commanded a price premium was less certain.

On the basis of more detailed information reported for some 480 transactions, the variability of the land market characteristics from one part of the state to another was quite evident. Both average acreage size and average price per acre were highly variable, although average parcel price was fairly uniform. Throughout the state, active farmers were the primary buyer group in 1987. More than half the transactions represented cash sales with no indebtedness incurred by the buyer.

Consistent with higher farm income levels in 1986 and 1987, negotiated cash rental rates for 1988 were higher. Cropland rates were generally 5 to 10 percent above 1987 levels. Likewise, pasture rental rates increased

throughout most of the state as the cattle market rebounded.

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