Tracking Market Values
One way to track real estate sale trends is to analyze the land using the weighted average productivity index (WAPI) compared to the sale price per acre. The WAPI is a summary of the soil types on a farm and the corresponding productivity index as provided by the USDA and NRCS. This analysis is done by dividing the price per tillable acre by the WAPI. For example if a farm sells for $7,500 per acre and the WAPI is 145, the result is $51.72 per WAPI point.
We track this value for all of our auctions that are primarily crop land and then chart these values to detect trends in the market. The following chart shows the results of the 2016 and 2017 sales to date. As you can see, there is a lot of variability between sales but the overall trend is steady since the beginning of 2016.
Despite all the negative news about lower commodity prices, reduced farm earnings and poor crops, land values have remained stable over the last 18 months. While these are negative factors for land values, there is some positive news. Farm owners have not been eager to sell their land since the price dropped, and the supply of land on the market is low compared to normal. Interest rates remain at historically low levels making repayments easier. Farm buyers still have cash remaining from the recent boon years and they want to reinvest that money in land. Many farm buyers see land as a stable, safe investment when compared to their other options.
In our opinion, land values in most areas should remain steady through this winter. In areas with particularly poor crops, we may see further deterioration in values. Contact your local Halderman Representative to learn about land values in your area.