WABASH, Ind. — The amount of farmland available for purchase is down across the region, according to officials with area real estate companies.

 

Howard Halderman, president of Halderman Farm Management and Halderman Real Estate Services, based in Wabash, began to notice the drop-off several months ago.

“Because of the lead time we need to do a public auction, we get an idea of the pipeline two, three months in advance,” he explained. “There really wasn’t a lot in the pipeline in the spring. I look at farm newspapers to see what’s for sale, the volume of advertisements, and it wasn’t nearly what you’d expect to see.”

Optimism associated with the election of President Donald Trump has impacted the marketplace, Halderman said. “There was anticipation we’d see people needing to sell something to correct balance sheets, but we didn’t really see that,” he noted.

“There’s more optimism out there and as a result, things are steady.”

As of mid-May, there were about 100 fewer farms for sale in Iowa than a year ago, said Steve Bruere, president of the Peoples Co. based in Clive, Iowa. “Inventory is definitely depressed,” he said. “The market in Iowa bottomed out in the first quarter of 2016. Inventory levels started to drop. That’s been the trend since the market peaked in 2013. (The decline) really got noticeable last summer and fall.”

Land values are off 20 percent in the state, leading to the perception it’s a bad time to sell, Bruere said. “Some say they’ll wait until prices rebound to sell. The market needs to find a direction. There’s a ton of liquidity waiting to purchase.”

The development market is stronger today than it was in 2005, he noted, adding it’s a challenge to find adequate land for development.

The farmland market is relatively tight right now, said R.D. Schrader, president of Schrader Real Estate & Auction Co., based in Columbia City, Ind. “I think most people who wanted to capitalize on high values have already sold,” he explained. “And since we have had a little bit of a down-tick in the market, people have been less aggressive about selling.”

The housing market, meanwhile, is currently seeing demand stronger than the supply, Schrader noted. “This is a growing function of the recovery and confidence from the downturn we experienced in the housing industry during the recessionary period. Some folks believe we are back close to 2007-2008 housing values.”

The value of Iowa farmland stabilized in 2016, though values were down 2.8 percent from 2015, according to a report released earlier this year from Farm Credit Services of America, which tracks land values and sales in five states. Public auctions in Iowa fell 3 percent in 2016 and completed sales were down 7 percent from 2015.

Large corn and soybean crops in 2016 in much of the region “helped profitability levels and contributed to continued demand for quality tracts,” said Mark Jensen, chief risk officer with Farm Credit Services America and Frontier Farm Credit.

Interest in farmland from institutional buyers is still there, though tempered, Halderman said. “They have strict parameters,” he explained.

“They’re seeking returns today a little stronger than what the market is offering. The demand is out there, but where we might have had five to 10 bidders at an auction, now we have two, three or four.” 

 

Halderman said any tax law changes, including an increase in the capital gains tax, could motivate some owners to sell their farmland. A continued drop in farm incomes could be another factor.

“We could look (this winter) at what was expected last winter,” Halderman said. “Some people might have to sell some things to fix liquidation issues or their balance sheet.”

Bruere said it’s difficult to know when the market will change and more farms might be available for purchase. “Every time I’m at a gas station, people will ask me what I think the land market will do,” he said. “This is the third year farmers are going to lose money, break even or make very little. It’s really tough to speculate.”