Agricultural Economics Department
Date of this Version
7-1986
Document Type
Article
Abstract
Results of the 1986 Nebraska farm real estate market survey indicate that farmland values continued to fall sharply during the past year as the current farm financial crisis persists. For the state, the average percentage decline from February 1, 1985 to February 1, 1986 was 24.7 percent. This drop in Nebraska land values of nearly 25 percent was even larger than the 23.5 percent decline reported a year ago. These percentage declines of the past two years now represent the largest decreases ever recorded in USDA's statistical series for Nebraska which dates back to 1912.
This downward trend in Nebraska land values has now continued for five consecutive years as the farm real estate market adjusts to current economic conditions and the financial stress in agriculture. The accumulated decline from the peak land values of 1981 now totals a drop of 55 percent for Nebraska.
In nominal terms, current land values are comparable to those values reported in 1974-75, prior to the boom period during the last half of that decade. In real terms (inflation adjusted), the declines in farmland values are even more dramatic. Current farm real estate values in Nebraska are equivalent to those values of 1950 when measured in real (purchasing power) terms. The gains or increased wealth to land owners in land appreciation during the past quarter century have been entirely wiped out by the losses reported during the past five years.
Large percentage declines in farmland values occurred in virtually every area of the state and for all types of land use. The largest regional declines were reported in the Central crop reporting district where land values dropped over 28 percent last year. Of the various types of land use, grazing land values (both tillable and nontillable) declined the highest percentages, down 29.4 and 27.4 percent respectively, last year.
Results of the 1986 farm real estate market survey indicated that farm expansion remained the most frequent reason or motive for purchasing farmland last year. The second most frequent reason stated was taking advantage of lower land prices. On the sellers'side of the market, financial stress was the dominant factor in selling land last year. This was evident in every district across the state, thus providing evidence of the severe financial troubles being experienced throughout all of Nebraska. The impact of the continued financial crisis on the farm real estate market cannot be overestimated.
Although there were fewer land sales last year, the most interesting finding that emerged from this year's survey was the fact that-nearly half of these sales were strictly cash transactions (no debt incurred). In contrast, only 10 percent of all sales in 1981 were for cash. Consequently, the financial profile of land buyers in the state appears to have changed.
In responding to a series of statements regarding Initiative 300, more than half of the survey reporters felt that Initiative 300 had contributed to the recent declines in Nebraska farmland values. Nearly three-fourths of the reporters disagreed with the statement that Initiative 300 would accomplish its objective of preserving the family farm.
Cash rental rates in Nebraska declined even further for 1986. Estimates from the 1986 farm real estate survey indicate that current cash rents for cropland are 10 to 15 percent below 1985 rates. For pasture/rangeland, cash rental rates on an AUM (animal-unit-month) basis dropped nearly 15 percent the past year. Current cash rental rates for cropland are 20 to 30 percent below 1982 rent levels, while pasture/rangeland cash rents have declined more than 30 percent in the past four years.
Comments
Published by Department of Agricultural Economics, Report No. 148, July 1986. The website address is: http://www.agecon.unl.edu/realestate.html
The authors 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.