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2006 Illinois farmland values at record level
Illinois Correspondent

URBANA, Ill. — Illinois farm real estate values were the highest on record in 2006, at $3,800 per acre, according to the USDA’s National Agricultural Statistics Service (NASS).

“That figure was 14.1 percent higher than the revised 2005 average of $3,330 per acre,” said Dale Lattz, a University of Illinois (UOI) Extension farm management specialist. “The 2005 revised figure was 27.6 percent higher than 2004 and was the highest increase since a 37.3 percent increase in 1977.”

Lattz reported that farm real estate values have increased every year since 1988, and by 68 percent overall since 2000. The NASS estimates are based on surveys of farmers from selected geographical areas and include the value of all lands and buildings.

“In a survey by the Illinois Society of Professional Farm Managers and Rural Appraisers, the top three factors given for the recent increases in farmland values are the large number of 1031 buyers - those who are buying land to replace land they sold to avoid capital gains tax, the limited supply of farmland, and low interest rates,” Lattz said.

Meanwhile, the Chicago Federal Reserve reported in their latest Ag Letter that farmland values in the Midwest District have slowed, but still rose 1 percent from 2005. According to the Reserve, the average quarterly increase for good agricultural land in the District was 1 percent from the first quarter of 2006.

Iowa exhibited the strongest quarterly growth with a 3 percent increase, while Illinois and Indiana were at the District average. Quarterly increases in land values were below the District average in Michigan and Wisconsin. The year-over-year gain of 9 percent for the District was 3 percent below last year’s pace, the report states, though it matched last quarter’s gain.

“The District continued to see the demand for residential and recreational acreages, as well as by nonfarm investors. Yet, given this year’s slowdown in the housing industry, the demand for additional farmland by developers seemed to slow, as indicated by reports of abandoned deals. So, location and other characteristics have become even more important factors in farmland values as increases have become more mixed,” the Reserve’s report reads, in part.

Gary Schnitkey, a UOI ag economist, told news sources the leveling out of prices in Illinois is a result of a downturn in demand from 1031 exchange buyers, primarily from the Chicago area.

“We haven’t seen a downturn in land values and (don’t expect one),” Schnitkey said. “We don’t believe there is anything out there that will cause a downturn in land values. 1031 demand is still there, it’s just not as active as it has been the past few years.”

The full report “Increase in Illinois Land Real-Estate Values Accelerates” can be read online at the UOI Extension’s farmdoc website: 13.html

This farm news was published in the Sept. 6, 2006 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.