The Future of Land Values: A Bold Prediction

December 23, 2014

The graph to the right shows land values, commodity prices, and interest rates since 2000. For the past 5 years, we have experienced unprecedented farm income and bullish land markets. The burning question today is:  With declining commodity prices, will land follow?

Since August 1st we have sold 11 properties by private treaty for over $5,680,000. We’ve also conducted 9 real estate auctions for over $21,000,000. Over 58% were cash transactions with no financing. Of the 20 properties sold, 14 were sold due to an aging population. Reasons to sell included situations where land was sold while siblings were alive to settle their affairs before passing to the next generation, settle estates, and/or dissolution of family or partnership holdings. Other reasons were retirement and a desire to sell before a decline in land values.

With lower commodity prices and interest rates, the quality, condition and location of a property will dictate its value. Higher quality properties continue to sell well while lower quality properties are experiencing a 5 to 15% decline in value. One recent buyer stated, “Good quality property, you pay for once; lower quality property, you pay for every year.”

In the immediate future, we see little decline in land values – except where buyers pay according to quality, condition, and location. There is a tremendous amount of cash in the pipeline and interest rates remain low. Buyers remain conservative, cautious, and discerning with a limited supply of land for sale. The concern is whether operators continue to break-even or take a loss. Plus, how long will it be before the cash pipeline is depleted? If there is not a sustained uptick in commodity price and if interest rates begin to rise, you may see buyers having less of an appetite to buy while land values begin to decline.

Review the spreadsheet of the properties we’ve sold in 2014. Read what our clients are saying about us. And make plans to attend upcoming auctions and properties for sale. If you have questions or have an interest in selling, let’s visit about your unique situation.


Marc Reck
Reck Agri Realty & Auction