Wisconsin’s Farm Real Estate Market Is Hot: So
What’s The Problem?
By Bruce L. Jones
Professor, UW-Madison Department of Agricultural and
Applied Economics
Farm Management Specialist, UW Center for Dairy Profitability
September 9, 2005
Sources of Data
Wisconsin Agricultural Statistics Service
(www.nass.usda.gov/wi/)
Land Values
Cash Rents
Economic Research Service- USDA
(www.ers.usda.gov)
Land Values
Cash Rents
Returns to Land
Federal Reserve Bank
(www.federalreserve.gov)
Interest Rates
Consumer Price Index
Dow Jones Industrial Average Index
US Census Bureau
(www.census.gov)
Home Values
Rents
Home Vacancies
Bureau of Economic Analysis
(www.bea.doc.gov)
Population
Per Capita Income
Bureau of Labor Statistics
(www.bls.gov)
Farm Land Values 1988 - 2004
State
New York
Georgia
Wisconsin
California
Growth Rate
3.4
5.88
7.79
5.1
Farm Land Values 1988 - 2004
State
New York
Georgia
Wisconsin
California
Growth Rate
1988-1997
19983.11
4.29
4.29
4.61
5.82
7.73
12.35
6.47
Factors Affecting the Value of Land
Land Valuation Model
R
V 
d
Where:
V is the value of land
R is the return or rent to land
d is the opportunity cost of capital
Increase in land values when:
Returns/rents to land increase ( Positive relationship )
Opportunity cost of capital decreases ( Negative relationship )
Rents
Interest Rates
Simple Correlation Coefficients For Selected
Wisconsin Farm Land Variables
Crop Land Returns to 10Yr Int Corn Yield Corn Price
Rent
Land
Rate
Land Value
Crop Land Rent
Returns to Land
10Yr Int Rate
Corn Yield
0.9032
-0.4415
-0.4933
-0.4408
-0.1894
0.3128
0.4500
0.4588
-0.1182
-0.2385
-0.0835
-0.1363
0.6042
0.2289
-0.4606
Factors Potentially Affecting The Non-Farm
U.S. Real Estate Market Measures
Housing Values 1988 - 2004
Region
Northeast
Midwest
Southeast
Far West
Growth Rate
19981988-1997
-1.64
7.88
4.26
3.08
8.96
6.83
8.76
10.49
Housing Rents 1988-2004
Region
Northeast
Midwest
Southeast
Far West
Growth Rate
1988-1997
19980.69
2.64
3.53
2.31
6.56
5.42
5.71
6.09
Per Capita Income
Region
New England
Great Lakes
Southeast
West
Growth Rate
1988-1997
19983.77
4.36
4.35
3.33
3.75
2.78
3.39
3.10
Population
Region
New England
Great Lakes
Southeast
West
Growth Rate
1988-1997
19980.43
0.77
1.58
1.66
0.62
0.48
1.26
1.46
Farm business balance sheet, December 31, (1000s)
Wisconsin
Item
Farm assets
Real estate
Other assets
Farm debt
Non-real estate
Real estate
Equity
1998
1999
2000
2001
2002
27,885,577
18,092,265
9,793,312
32,693,567
22,624,713
10,068,854
36,597,058
26,617,309
9,979,749
39,366,081
29,279,040
10,087,041
40,780,320
30,187,532
10,592,787
5,817,010
2,955,673
2,861,337
5,930,811
2,915,272
3,015,539
6,202,714
3,091,260
3,111,454
6,499,690
3,221,032
3,278,658
6,531,705
3,263,559
3,268,146
22,068,567
26,762,756
30,394,344
32,866,391
34,248,614
Wis cons in Balance She e t Tre nds
50000000
40000000
30000000
20000000
10000000
0
1960
1970
1980
Farm Assets
1990
2000
Farm Debts
2010
De bt to As s e ts
30
28
26
24
22
20
18
16
14
1960
1970
1980
1990
2000
2010
Owned Land as a Percent of Land in Farms
Source: Census of Agriculture
Year
2002
1997
1992
1987
Wisconsin Illinois
72.20
42.36
72.71
39.56
72.69
38.36
73.73
40.30
Michigan Minnesota
61.84
60.37
61.32
59.36
62.44
57.94
65.47
60.13
Harvested Cropland as a Percent of Land in
Farms
Source: Census of Agriculture
Year
2002
1997
1992
1987
Wisconsin Illinois
56.72
82.62
57.89
81.88
57.19
80.25
56.21
70.47
Michigan Minnesota
67.32
70.51
68.11
72.97
65.27
70.91
59.83
62.60
Value of Illinois Farm Re al Es tate
3000
2500
$ per Acre
2000
1500
1000
500
0
1950
1960
1970
1980
Year
Illinois Actual
1990
2000
Illinois Trend -- 5.12 % Growth
2010
Value of Wis cons in Farm Re al Es tate
3000
2500
$ per Acre
2000
1500
1000
500
0
1950
1960
1970
1980
Wisconsin Actual
Year
1990
2000
Wisconsin Trend -- 5.98 % Growth
2010
Annual Change in Land Value =
ValueN
ValueN  1
Farm Land Value Statistics: 1951-2004
Sorted by Average Annual Change in Value
Arizona
Florida
Georgia
Massachusetts
New Hampshire
Rhode Island
Connecticut
Alabama
Delaware
Vermont
AVG
1.1032
1.0791
1.0787
1.0769
1.0746
1.0745
1.0721
1.0716
1.0714
1.0711
STD
0.2150
0.0708
0.0628
0.0456
0.0623
0.0662
0.0435
0.0639
0.0633
0.0515
CV
0.1949
0.0657
0.0582
0.0423
0.0580
0.0617
0.0406
0.0597
0.0591
0.0481
Farm Land Value Statistics: 1951-2004
Sorted by Coefficient of Variation
Arizona
Iowa
Minnesota
Utah
Illinois
Nevada
Nebraska
Indiana
North Dakota
New Mexico
AVG
1.1032
1.0552
1.0632
1.0667
1.0554
1.0664
1.0544
1.0611
1.0557
1.0578
STD
0.2150
0.1069
0.0987
0.0947
0.0917
0.0927
0.0914
0.0900
0.0863
0.0834
CV
0.1949
0.1013
0.0928
0.0888
0.0869
0.0869
0.0866
0.0849
0.0817
0.0788
Farm Land Value Statistics: 1971-2004
Sorted by Average Annual Change in Value
Arizona
Massachusetts
Rhode Island
Utah
New Hampshire
West Virginia
Wisconsin
Maine
Connecticut
Nevada
AVG
1.1159
1.0889
1.0830
1.0828
1.0820
1.0771
1.0763
1.0759
1.0743
1.0732
STD
0.2664
0.0482
0.0773
0.1134
0.0698
0.0932
0.0898
0.0550
0.0472
0.1042
CV
0.2387
0.0442
0.0714
0.1048
0.0645
0.0866
0.0835
0.0511
0.0440
0.0971
Farm Land Value Statistics: 1971-2004
Sorted by Coefficient of Variation
Arizona
Iowa
Minnesota
Utah
Illinois
Nebraska
Indiana
North Dakota
Nevada
New Mexico
AVG
1.1159
1.0602
1.0699
1.0828
1.0562
1.0564
1.0634
1.0524
1.0732
1.0600
STD
0.2664
0.1294
0.1186
0.1134
0.1100
0.1096
0.1055
0.1041
0.1042
0.0972
CV
0.2387
0.1220
0.1109
0.1048
0.1041
0.1037
0.0992
0.0989
0.0971
0.0917
Farm Land Value Statistics: 1991-2004
Sorted by Average Annual Change in Value
Arizona
Massachusetts
Rhode Island
Utah
New Hampshire
West Virginia
Wisconsin
Maine
Connecticut
Nevada
AVG
1.1159
1.0889
1.0830
1.0828
1.0820
1.0771
1.0763
1.0759
1.0743
1.0732
STD
0.2664
0.0482
0.0773
0.1134
0.0698
0.0932
0.0898
0.0550
0.0472
0.1042
CV
0.2387
0.0442
0.0714
0.1048
0.0645
0.0866
0.0835
0.0511
0.0440
0.0971
Farm Land Value Statistics: 1991-2004
Sorted by Coefficient of Variation
Arizona
Iowa
Minnesota
Utah
Illinois
Nebraska
Indiana
North Dakota
Nevada
New Mexico
AVG
1.1159
1.0602
1.0699
1.0828
1.0562
1.0564
1.0634
1.0524
1.0732
1.0600
STD
0.2664
0.1294
0.1186
0.1134
0.1100
0.1096
0.1055
0.1041
0.1042
0.0972
CV
0.2387
0.1220
0.1109
0.1048
0.1041
0.1037
0.0992
0.0989
0.0971
0.0917