Muscatine Journal, IA
01-04-07
Louisa County farmland prices make 2nd-highest jump in state
By Connie Street of the Muscatine Journal
WAPELLO, Iowa — Farmland prices in Louisa County are up by 17 percent
since 2005, according to an annual survey conducted by an Iowa State
University. The increase was the second highest in Iowa, with Audubon County
at 17.2 percent.
Several reasons for the higher land prices were cited by government officials and
Realtors. The change in demand for corn, partly attributed to its role in the
bioeconomy, is having far reaching impacts on Iowa agriculture, while some
buyers are looking for secluded building sites or personal hunting areas.
Even though prices are up, local officials say that does not necessarily mean tax
bills will increase. Those are based on assessed valuations, not market prices.
Louisa County Assessor Greg Johnson said the Iowa Department of Revenue
and Finance revises farmland valuations in odd-numbered years. The valuations
for agriculture classifications are not based on land sales, but rather a variety of
indicators that affect the ability to grow crops, Johnson said.
Johnson said the state looks at a five-year rolling average including commodity
prices for corn, beans and hay; rental costs for ag land; rainfall; and the amount
of corn and beans grown in each county.
“Rain has a lot to do with the valuations,” Johnson said. “A couple of dry years in
the five-year average could make a big difference.”
Johnson said that in 2003, ag valuations decreased by 19 percent, meaning a
loss of $32 million in taxable value. In 2005, ag land valuations went up by 7.13
percent in Louisa County.
Johnson said the Department of Revenue and Finance is tentatively looking at an
increase of 8 percent to 9 percent across the state for 2007.
According to the ISU report, the 2006 average market price statewide topped a
previous record of $2,914 per acre reported in 2005, and it represented a 10
percent increase statewide over the 2005 average. For the first time, the average
price of an acre of land in Iowa topped $3,000.
Johnson said that farm land sales in Louisa County show an average price of
$2,900 for high-grade land, $1,390 for medium- grade land and about $500 for
poor land in 2006.
Country livin’
Prices for land sales in Louisa County have been good, but Columbus Junction
real estate broker Larry Robertson says it is not necessarily crop land that is
selling higher.
“Prices on timberland are increasing,” Robertson said. “What used to sell for
about $700 an acre could now bring $2,000 if the ground is located strategically.”
Johnson said many buyers
are looking for secluded building sites.
“People want to go to the country to live,” Johnson said. “Some sites have gone
as high as $6,000 to $7,000 an acre.”
Robertson said those same areas would have sold for about $3,000 an acre a
year ago.
Johnson said one tract of land near the Johnson County line, and measuring just
over 1 acre, was recently sold for $46,000. Johnson said that particular area of
Louisa County is a popular place to live because it is about a 15-minute drive
from Iowa City and property costs and taxes are lower in Louisa County than in
Johnson County.
Robertson said the land market is strong. He agreed that some of the better
selling areas with high price tags are those that are not far from urban centers
such as the Iowa City/Cedar Rapids area and the Quad-Cities area. Robertson
also noted that there “isn’t a lot of land for sale to meet the demand.”
Other reasons for increasing land prices
Robertson said tax laws also have an effect on land sales. He said investors roll
their capital gains income into real estate to defer the taxes.
ISU Extension farm economist Michael Duffy, who conducted the survey,
suggested increases in farmland prices can be tied to the rapid increases in grain
prices. Corn prices averaged $2.07 per bushel from January to October of this
year, but current cash corn prices are well over $3 and it is possible to sell corn
on the futures market for the next couple of years for that price.
However, Robertson agreed that the increased number of nearby plants making
ethanol has elevated the corn market. But, he said high corn prices could hurt
the livestock farmers by increasing the cost of food. It will cost them more to buy
corn to feed their livestock if they don’t grow their own or if they do raise crops, it
could be worth more to sell it instead of feeding animals with it.
There is an ethanol plant in Des Moines County and one in Washington County
and a third company, Cedar River Ethanol, is looking for a location somewhere
between Columbus Junction and Washington.
‘Pure guesswork’
Dale McCrea, Muscatine County assessor, said Muscatine County, whose values
have gone up about 10 percent, is seeing “junk ground” or timber and river
bottoms being sold for hunting areas as well as development.
McCrea said reports on land prices should be based on actual sales. “This
survey is pure guesswork.”
ISU Extension Farm Management Specialist Jim Jensen agreed.
“These are just surveys,” Jenson said. “They work with bankers and Realtors and
others and in some cases, the results are guesswork. Other reports are based on
actual sale prices.”
Jensen said it is difficult to compare Muscatine and Louisa counties, since zoning
rules in Muscatine County require only 1 acre of land for a building site, while
Louisa, in most cases, requires 5 acres.
Both McCrea and Johnson have expressed concerns about the ground that is
purchased for hunting. They said owners of timber ground with 200 trees per
acre and no buildings can turn the tracts into forest reserve land and pay no
taxes.
Contact Connie Street at: 319-527-8164 or ckcasey@louisacomm.net