Date of this Version
In this silver anniversary edition, we provide a 25-year perspective of Nebraska's agricultural real estate market as well as analyzing the market dynamics of recent months.
Despite being a market of very limited turnover rates of ownership as well as rental leases, the market for agricultural real estate is still very dynamic. This is very obvious in the past 25 years during which agricultural land values in Nebraska experienced both "boom" and "bust" conditions before developing a more steady-to-gradually-upward trend more recently. Average 2002 levels of values in nominal terms are essentially in the same range as those of the previous historical peak more than 20 years ago (and prior to major value declines.) However, when adjusted for general inflation in the U.S. economy, these current values in real, purchasing power terms are more than 25 percent lower than the previous peak (which hindsight would suggest was an unsustainable economic aberration.) While the nature of the market participants (buyers and sellers) have remained fairly similar over the past quarter century, today's market is characterized by a much higher percentage of cash sales (no debt financing) as well as larger down-payment levels associated with current mortgages. In other words, today's market for farm real estate in Nebraska is on a much stronger financial footing than that of a quarter century ago.
As for the more recent patterns, the 2002 UNL Nebraska Farm Real Estate Market Survey showed February 2002 values up an average of 3.9 percent above year-earlier levels. Although not all areas of the state and land types experienced this level of increase, there were no instances where survey panel members reported declines. This fairly solid traction in the land market was attributed to a number of factors including: demand for farm expansion (with limited offerings on the market), current mortgage interest rates, "1031" tax exchanges, federal farm program dollar infusions, and non-farmer investor interest.
Cash rental rates for 2002 season are generally higher than year-earlier levels, as demand for rental land by expanding farm operators remains strong throughout the state. In a number of instances, the 2002 cash rental rates represent historic highs. Pasture rental rates for 2002 (whether measured on a per-acre basis or animal-unit-month basis) are also reportedly higher.
Reported estimates of net rates of return to land for 2002 were generally steady to somewhat lower. This has essentially been the trend of the past several years as land values have tended to increase at a somewhat faster rate than the associated dollar net returns.