Have ag land values peaked?
Created: 9/04/13 (Wed) | Topic: Issues
It's a "good possibility" land values have peaked, says Andrew Swenson, Farm and Family Resource Management Specialist, NDSU Agribusiness and Applied Economics Department.
Swenson says the results of a June survey shows the average cropland values in North Dakota at $1,910 per acre. That's a 41.5 percent increase from the previous year.
The national average was 13 percent.
Swenson says one factor is the low interest rates. "Ten years ago, an acceptable return on land investment (cash rent minus real estate taxes divided by land value) was more than 6 percent. Now it is about 3 percent. That alone has doubled land values. To achieve a return of just one percentage point more, to 4 percent, land values would need to drop by one-fourth while other factors held constant."
Read Swenson's analysis.