Marion County is joining the rest of the country in the real estate boom that has led to rising prices for productive agricultural land.
Prices for both crop land and pasture land are climbing at rates that would have been seen as a fantasy two years ago.
Lyle Leppke, a Hillsboro-based real estate broker who has a special focus in farm land sales, said, “Two years ago you didn’t see land prices over $2,000 an acre here. Now we’re seeing $3,000 an acre and higher.”
Marion County Appraiser Cindy Magill said the higher land prices are beginning to be reflected in taxes with another big jump in values this year.
Magill said tax values not only depend on prices, but on such factors as whether ground is tilled or in pasture, whether production is aided by irrigation, or grasslands are native grass or bromegrass.
Magill said the latest figures used for property taxes are based on 2003 through 2010, so they don’t reflect current values.
Those values, she said, show cropland up an average 8 percent and pasture actually down 6 percent, although recent experience shows it has been increasing.
Leppke said with cattle prices holding up, grazing land is increasing in value just like tilled ground.
“When farmers are coming home with 20 to 30 percent more money from the elevator, they are willing to pay 20 to 30 percent more for the land,” he said.
Leppke added that these value increases in real estate are not always good for everybody.
As one 70-year-old farmer remarked, “I wish we could have had those kinds of prices when I was younger.”
But, Leppke said, that older farmer probably has paid off his land by now, and doesn’t necessarily need the better farm income to live on at the moment. Instead, he looks for other investments.
Leppke added that farmers aren’t usually the kind of people who think of putting extra money in the stock market.
“They put it into land,” he said. “And, they can be at a place in life where they don’t have to go to the bank to get it.”
The tough thing in the farm real estate market now, Leppke said, is that land for sale is becoming increasingly hard to find. Farmers are hanging on to it to expand.
For the young person, getting into farming without significant family backing has become even more impossible at these prices.
Leppke said city dwellers who have seen their home values decreasing or holding stable can only wish their values were increasing like farm values—a trend which is reverse of the traditional situation.
Leppke said persons outside of agriculture frequently don’t realize that farmers pay huge prices for equipment. That’s where much of the higher income is going as well, he said.
For instance, Leppke said a new combine can cost $300,000, and a new hay swather can cost $150,000.
He said being an auctioneer puts him in a favorable position because land sellers prefer bidding rather than simply listing it as a parcel for sale.
Leppke said the way land values have changed, given it took 25 years for land to go from $200 to $500 an acre to $1,500 to $1,600.
According to the Federal Reserve Bank of Kansas City, farmland in its 10th District during the fourth quarter of 2011 increased from 7.5 to 8.9 percent.
The FRBKC said many absentee land owners saw the increase as the opportunity to sell their land at higher values.
But Leppke said many absentee landowners here hang on to the land to share in the increased crop prices.
FRBKC said cropland rental rates increased an average 18 percent in 2011 compared to 6 percent in 2010.
The FRBKC said bank loans for farm real estate are picking up. In addition to good crop and cattle prices, low interest rates are contributing to land sales.
Their reports indicate the pace will continue in 2012, with the biggest demand for land in Nebraska, with Oklahoma on south lagging because of last year’s drought.
National insurance groups are reporting the surge in land prices here, while on the coasts farmland prices that formerly were driven by suburban growth have declined.
These groups said land prices were also driven higher by wildlife hunters until 2008, when interest began to decline because of loss in urban property values.
Thomas Hoenig, FRBKC president, has cautioned against borrowing money to buy land at the new prices because farmland prices may be getting too far above what is warranted by crop prices.
Hoenig and other farm leaders are concerned that a market bubble could be forming, although some of them note that with higher-priced grain exports, the nation is merely passing along its inflation to other countries with rapidly growing manufacturing economies and new demands for better-quality food.
Leppke said he doesn’t see any signs of a slowdown or bad credit risk in Marion County. It’s merely farmers buying while they have the money to do so, with total price an uncharacteristically low consideration.