Jim Rothermich, a farm real estate appraiser for Iowa Appraisal, discusses the current state of farmland and land values in Iowa. He explains that farmland, particularly in Iowa, has a strong connection to family bonds, making it a difficult decision to sell, especially for those nearing retirement age. Rothermich mentions the challenges of purchasing farmland worth millions of dollars at retirement age and the impact it can have on annual income.
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Rothermich shares that his data indicates a stable market in 2023, with a slight decrease of 1% in land values compared to the previous year. The statewide average for high-quality farmland in Iowa is $13,798 per acre, or $176 per CSR2 point. He also notes that there was a post-harvest bump in land prices due to uncertainty about crop yields pre-harvest. However, the market is now cooling off after an extended period of aggressive price increases.
The appraiser mentions that the buyer pool has shrunk considerably, with potential buyers being deterred by high interest rates. He also highlights that some sellers still have unrealistic price expectations, contributing to a higher number of no-sales at auctions. Rothermich believes that the market will likely cool off further and experience small percentage decreases, but he doesn’t anticipate a crash.
Rothermich discusses the difference between in-person and online auctions, stating that while some people prefer the excitement of live auctions, online auctions offer anonymity and increased competition. He shares data on land values in different crop districts in Iowa, with the Northwest district having the highest average land value. He also mentions that cash rent rates remain strong, suggesting stable land values for the next few years.
Looking ahead to 2024, Rothermich predicts that interest rates will be in the 5-6% range, with interest rates below 5% unlikely to return anytime soon. He anticipates stability in land values based on cash rent data, which indicates no weakness in the market. Rothermich advises potential buyers to take advantage of current volatility in the market and consider purchasing farmland if they have the means to do so.
Overall, Rothermich paints a picture of a stable farmland market in Iowa, with some cooling off after a period of aggressive price increases. He encourages potential buyers to carefully consider their options and take advantage of opportunities in the market.