Record Land Values Continue Through End of 2012

December 31, 2012

We continue to experience record land values across Colorado, Nebraska, and Kansas at the end of 2012. Sales for pivot irrigated land range from $4,000 to over $9,000 per acre, dry farmland is ranging from $500 to over $3,000 per acre, grassland is ranging from $350 to over $800 per acre, and CRP land sales ranging from $450 to $1,250 per acre throughout Eastern Colorado, Western Nebraska, including the Panhandle, and Western Kansas. The wide range in values depends on location, quality of land, and surrounding neighbors and trade area.

Why the continued increase in land values? In my opinion, low interest rates are the primary reason. The same reason people aren’t selling is the same reason people are wanting to buy. What do you do with the money? If you sell, there is no CD or alternate investment which returns the same as land. Thus, there is limited amount of land for sale and with the tremendous amount of cash within the farming community, this creates a red-hot seller’s market. In addition, buyers are locking in lower long-term interest rates.

Who is selling? In my opinion, today’s sales are circumstance driven. What I mean is that the sale is a result of dissolution of trust, estate, or partnership and/or where circumstances are driving the sale rather than financial. Even with the record high land values and the termination of the 15% capital gains taxes, I thought we would have experienced a higher number of land sales. This indicates the majority of landowners prefer the higher return from their land rather than taking advantage of a red-hot seller’s market. Also, we are facing the AGING CLIFF of agricultural operators and landowners. We estimate the majority of private landowners in the United States are over the age of 65. The average age of the farmer operator is 58 years old. In the next 5-10 years we will be experiencing the largest generational transfer of wealth that I will have experienced in my lifetime. The majority of the land will be transferred within family by inheritance, gifting, and/or sale. The balance will be sold because of circumstances driving the sale i.e. debt, divorce, dissolution, or death. Over 80% of our sales are a result of siblings, relatives, and/or parents over the age of 70, selling properties which have been in the family from 50 to over 100 years.

If we can be of service to you with valuing your farm or ranch property or listing your property, please call us at Reck Agri Realty & Auction.

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