Agricultural Economics Department
Date of this Version
6-1993
Abstract
For the Sixth Consecutive year, Nebraska's agricultural real estate values rose in 1992. According to the 1993 UNL Nebraska Farm Real Estate Market Survey, the increase was just over 4 percent for the year ending February 1, 1993. Still, the 1993 all-state average value remains 30 percent below the peak level of value reached in 1981.
Not all areas of the state experienced land increases during 1992. All-land average values remained essentially unchanged during 1992 in the northwest, north, and southwest areas of Nebraska while gains of 5 to 7 percent were recorded in the eastern third of the state and the south. Weather appears to have been a major contributing factor to this geographic pattern of value changes.
Observes of the market see a supply that is not very price responsive; most land comes on the market because of estate settlement or retirement of the owner-operator. On the demand side, active farmers/ranchers dominate the market as they seek add-on units. In turn, the market tends to be one of parcels rather than complete operating units.
Despite a favorable mortgage financing environment in 1992, a substantial share of the transactions continued to be cash purchases with no debt being incurred.
Cash rental rates for 1993 tended to be higher than year-earlier levels in those parts of the state where values had also increased. Elsewhere, rates were stable to slightly below 1992 levels. For many land types and areas of the state, the 1993 cash rent levels are at, or even exceeding, previous historical highs.
Average annual net percentage rates of return on agricultural real estate tend to fall in a range of 4 to 6 percent of current market value. These rates appear to be somewhat low relative to other investment alternatives, and reflect the fact that the market for agricultural real estate is multi-faceted with both economic and noneconomic motives influencing market value.
Comments
Publication by the Department of Agricultural Economics, Report # 170, June 1983. Website address is http://agecon.unl.edu/realestate
The Authors express their appreciation to the survey reporters for their participation 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.