A Spotlight on the Land Market: Recent Trends and Insights

A Spotlight on the Land Market: Recent Trends and Insights

Recent trends in the agricultural land market have been nothing short of dynamic, reflecting a series of factors that contribute to the value and desirability of Nebraska real estate. Here we explore these trends, drawing upon key insights from the February 2023 survey conducted by Jim Jansen & Jeffrey Stokes from the University of Nebraska – Lincoln.

Read Jim & Jeff’s full report here.

Diverse Factors Impacting the Land Market

Jim and Jeff start out the report highlighting that the value of a given real property can deviate substantially due to a myriad of physical attributes – location, soil type, topography, and depth of water, among others. Furthermore, local market forces and government policies, such as water usage restrictions, also have significant impacts on the value of agricultural land.

Regional Variations

There can be considerable differences within reporting districts that affect real estate values and rental rates. For example, the North reporting district for Jim & Jeff’s report spans almost 200 miles from east to west, and the westward decrease in precipitation can substantially affect the value and rental rates for crop and range ground.

2023 Survey Insights

The 2023 survey, garnering responses from nearly 197 expert panel members across the state, provided current information and insight regarding agricultural land market conditions. The panel provided information on 738 sales representative of the recent market.

An Uptick in Land Value

The statewide all-land average value for the year ending Feb 1, 2023, averaged $3,835 per acre, marking a 14% increase from the prior year’s value. This surge is driven by current crop prices, farm expansion, and non-farmer investor interest. Consequently, Nebraska’s estimated total value of agricultural land and buildings rose to approximately $191.8 billion.

Various Land Market Increases

Both types of irrigated cropland, gravity and pivot irrigated, reported annual statewide average increases of 12% and 13%, respectively. Dryland with irrigation potential saw an annual statewide average increase of 16%. Grazing land (tillable, non-tillable) and hayland increased between 14% and 17%.

All-Land Average Value Growth

In 2023, the non-inflation-adjusted market value for the all-land average continued a fourth year of increases, rising to $3,835 per acre. Over three years, the all land average value has increased an impressive 41%!

Inflation and Investment

Rising inflationary pressure has renewed interest in tangible investment purchases such as real estate. Operators and investors are using land purchases to navigate inflation and grow farms or ranches.

Capitalization Rates and Financing

Capitalization rates varied from 1.6% to 3.9% across agricultural land in Nebraska, with irrigated cropland reporting the highest returns. Interestingly, cash and mortgaged purchases accounted for nearly equal parts (49% and 48% respectively) of the financing of land transactions.

Who's Buying and Selling in this Land Market?

Active farmers or ranchers accounted for 73% of the land purchases reported by panel members. Meanwhile, active or quitting farmers and estates accounted for nearly 72% of the sellers of agricultural real estate transactions.

Cash Rental Rates

Cash rental rates for dryland and irrigated cropland trended steady to higher across Nebraska in 2023.

The agricultural land market in Nebraska is undeniably thriving, driven by a host of factors and trends. At Marshall Land Brokers & Auctioneers, we’re committed to staying ahead of these trends, guiding our clients through this dynamic landscape with expertise and insight.

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