Land Values and Farm Sales in Indiana
Whether you call it market corrections or stabilization, the farmland values of the local real estate market have been in a flux for a few years. Top quality land that is very productive continues to maintain a high price per acre, while average to marginal quality farms and land have seen declines as much as 15% or more in the last year or two.
Key Factors to the Best Price Per Acre
From local competition to the taxes per acre, the location of a farm continues to play a vital role in the price per acre. Farmland that sits next to high quality farm operators may bring more per acre, particularly when competition plays a factor. Working with a land broker that has relationships with local farmers and land investors also plays a vital role.
Regardless of your understanding of soil profiles and soil types, the productivity of a farm is a key component of price. Top Quality Class A farms will have a higher National Commodity Crop Productivity Index, or NCCPI, or Surety WAPI, Weighted Average Productivity Index than a Class B or Class C soils farm. As these numbers go up, they are indicators of the price per acre.
We track local farm land sales and can help valuate and determine the price per acre average.
Precipitation and annual rainfall in the local area also factor into the productivity of a farm and the price per acre. Top quality soils in Indiana county regions such as Tippecanoe, Benton, Warren, Carroll, White, Clinton and Jasper or Newton County can have a varied annual rainfall from 30 t0 40 inches of rain. These dynamics are key to cash rents, returns and the price per acre.
Return on Investment
From cash rent rates to farm real estate investment returns, the ROI of a farm is looked at from a buyer and seller perspective with different perspectives. A farmer will calculate input costs, while investors are looking at straight cash rent returns that are typically 2.8% or higher. Some flex leases allow an investor to gain greater returns when crop prices are on the upswing.
We have many people to thank for a great 2016. From farm families who trusted our team to handle a very personal once-in-a-lifetime sale of the family farm to our own families, friends and colleagues who have supported us in the farm real estate business, we are very thankful for a successful 2016.
Many believed that we may see an increase in interest rates for loans on farm real estate in 2016, but as of today, this hasn’t happened. Additionally, farm cash rent rates (price per acre) adjusted downward for many farmers and while this has somewhat reduced ROI on lower quality farmland, investors and landowners of top quality tillable acres are still seeing cash rents in our local area over $300 per acre in some Indiana counties. Overall though, we have seen quite a bit of downward adjustment to account for lower farm incomes in 2016.
- No increases in farm real estate loan interest rates
- Cash Rents Adjusted
- Fertilizer & Seed Adjustments
- Land Values Adjusted based on Soil Quality & Location
96% – total percent of listed price attained on all tillable agricultural farms sold by Geswein Farm & Land in 2016
1,055 total number of acres of land Geswein Farm & Land sold in Indiana in 2016
Wooded Land Values continue to rise – stronger demand & low inventory
Top Quality Farms – Some farmland sold for over $12,000 per acre in 2016
Who is Investing in Farm Real Estate?
Throughout 2016 we saw a new wave of farmers investing in farmland. Many farming operations that sat on the sidelines during the big run up in farmland values were frequently bidding on smaller tracts of agricultural land. Additionally we saw many Institutional Investors as well as private Investors moving 1031 money into agricultural farmland. Reason for land investment ranged from portfolio diversification to simply creating steady cash flow based on the longterm performance of farmland vs. the stock market. Several buyers indicated that having a tangible asset was an important factor in their decision to invest in farmland.
Wooded Property For Sale
The trend in 2016 for wooded land continued in the same direction as 2015, higher prices per acre, very little inventory for sale in Tippecanoe County, and an increase in the number of buyers. In areas such as Warren County, if the land for sale is in close proximity to West Lafayette, we continue to see the price per acre on the rise. Wooded property with timber value is also in a stronger demand situation. Low inventory of “wooded retreats” or wooded country estates has contributed to a continued run up in price per acre.
2016 Market Highlights
- 460+ Acres of Wooded Land Sold
- 145+ Acres Currently Under Contract
- Multiple Wooded Tracts sold at $9,000+ per acre
As always, one of the most important parts of our job is to keep you informed of the market. In the meantime, we continue to monitor sales, the price per acre and where land values stabilize as investors seek to move money from the stock market to more stable long-term investments.
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The annual PAER Agricultural Economy guide, reports on farmland values across the entire state of Indiana. One of the most respected surveys of agribusiness professionals, lenders and farmer operator producers, the report will highlight the trends in land prices and the price per acre.
The Full Report will be release in a matter of days and we will provide a full review of land prices of Top quality, average and low quality land throughout West Central Indiana counties of Tippecanoe, Benton, Warren, Fountain, Montgomery, Carroll, Clinton, White and Newton.
Whether you are searching for Purdue’s research findings on Cash Rent in 2016 or the results of the Purdue land value survey, we will get you the full details and link to the annual Purdue Agricultural Economics report 2016.
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Geswein Farm & Land Realty, LLC
3624 Mulberry Drive
Lafayette, IN 47905