Agricultural Economics Department
Date of this Version
7-1982
Abstract
Nebraska farm real estate values declined nearly 4 percent during the past year. The reasons are quite obvious -- low farm income, changing inflation expectations, and continued high interest rates. The combination of these fac tors has drastically altered what was a "bullish" land market up until 1980.
During the 1970's, farmland values were appreciating rapidly. The average increase was approximately twice the rate of inflation. The real value (purchasing power)of farmland doubled during this decade. Financial leveraging was extremely profitable for farmland investors and land prices were quickly bid up.
The past year represents quite a contrast. Adding an 8 percent inflation rate to the 4 percent decline in the nominal value of farmland, the real value of Nebraska farm real estate dropped 12 percent during 1981. While declines in real terms have occurred in ten of the years since 1950, this current drop was the largest.
The largest decreases in land values appeared in the eastern third of Nebraska, averaging 6 to 7 percent below last year's values. Elsewhere, the declines were much smaller. In fact, land values remained essentially unchanged in the Northwest, North and South Crop Reporting Districts of the State.
These land values changes also varied by land type. The largest declines were reported for dryland cropland, particularly for that having irrigation potential. While gravity irrigated land showed only a slight drop, center pivot irrigated land was down by a much larger amount.
Farmland sales activity was rather slow during 1981. Very limited, if any, transfer activity occurred in many localities. Although estate settlement still rankeq as the most frequent reason for off::::,ing farmland for sale, the incidence of sales due to financial stress was clearly higher in 1981.
This report also includes a discussion of seller contract land financing in Nebraska and the cash rental rates for farmland/ranchland in 1982.
Comments
Publication by the Department of Agricultural Economics, Report # 125, July, 1982. The website address is: http://www.agecon.unl.edu/realestate.html
The authors wish to express their appreciation to the survey reporters for their participation in completing and returning the Nebraska farm real estate market survey questionnaire. Without their efforts and interest, the availability and publication of the data within this report would not be possible. Special thanks is also extended to the Federal Land Bank of Omaha for providing the farmland sales data for Nebraska published in this report.