Agricultural Economics Department
Date of this Version
6-1992
Abstract
Nebraska's agricultural land values moved slightly upward during 1991 as the market operated in a mode of relative stability. The 15th annual UNL farm real estate market survey recorded an overall state average increase of 3.7 percent for the 12-month period ending February 1, 1992. This rate of change matched the u.s. rate of inflation during 1991, so in real (purchasing power) terms, there was essentially no change in average value.
Most market observers saw no apparent change in volume of market activity during 1991 from the previous year. Estate settlement and retirement constitute the primary reasons for agricultural real estate coming on the market while purchases for expansion by active farmers remain as the dominant element of the demand side.
UNL survey reporters provided detailed information on 420 actual sales consummated during 1991. More than half'of these sales (53 percent) were reportedly outright cash acquisitions. While credit financing remains a part of the real estate market activity, its role has been a secondary one to the liquid, equity assets which buyers have recently been bringing to the bargaining table.
Cash rental rates for 1992 are generally similar to 1991 levels throughout most of the state. The exception was the Northeast where current rates for the various land types were reportedly down somewhat. Pasture cash rates on an Animal-Unit Month (AUM) basis have remained at historical highs into 1992.
As for average expected net rates of return on current real estate values, reporter estimates for 1992 were down slightly from recent years. The decrease is likely reflecting reduced farm and ranch income levels during 1991 while values have risen. In essence this represents a rising price-earnings ratio. While these average rates of return are currently competitive with other common investment opportunities, they clearly fall below mortgage interest rate levels. Consequently, even though mortgage interest rates have recently fallen to their lowest levels in 25 years, there is not heavy demand for real estate backed by debt financing.
Comments
Published by the Department of Agricultural Economics, Report #169, June 1992. The website address is: http://www.agecon.unl.edu/realestate.html
The author expresses 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.