Interest rates not hurting land prices

For The Weekly Post

As the cold, post-holiday reality of winter arrives, land auction season is ready to get hot. And while interest rates doubled in 2022, land prices have still increased.

In fact, on Dec. 20, Murray Wise Associates auctioned a farm that is believed to have generated the highest sales price ever in Henry County. A 38-acre parcel of high-quality soils located just southwest of Kewanee sold for $21,100 per acre and a 9-acre tract sold for $18,100 per acre.

While that pales in comparison to the $30,000-per-acre price tag from a Nov. 11 auction in Iowa for 73.19 acres, it does underline a market trend that has seen land prices increase by an estimated 42 percent since 2020. During the first half of 2022, farmland prices rose by 18 percent across Illinois and many expected that to stagnate. If the Henry County sale is any indication, that does not appear to be happening.

“We had a good mix of farmers and investors. Farmers were a major factor in this auction because it makes sense to purchase this and integrate it into their existing operations,” said Liz Strom, a Toulon native who is a vice president at Murray Wise.

On the same day it conducted the $21,100 sale, Murray Wise auctioned a 78-acre Grundy County farm for $16,200 per acre. That land had average soils for the area, but also had an existing lease for a wind turbine.

“That we were able to have two sales of such success in different locations and dissimilar farms just goes to show how strong the market is holding up in the face of higher interest rates,” said Eric Sarff, President of Murray Wise. “We had 25 and 32 bidders registered for each auction respectively and of those we had 12 bidders place bids during the auctions with farmers and investors alike participating.”

Van Adkisson of Roseville has also seen prices remain strong at the auctions he has conducted, including a $20,200 price tag for a 47-acre tract sold Nov. 18 in Warren County, northwest of Roseville.

“I don’t think we’ve seen the interest rates impact the Class A land, but I think it has started to affect the lower-class lands,” said Adkisson, who classifies Class A land as having a productivity index over 138.
Adkisson said commodity prices have remained high enough to stabilize land values and to attract investors from other parts of the country.

Adkisson, who has been selling farms for 49 years, said his best recent sale was $20,750 per acre for a 77.9-acre parcel located between Galesburg and Monmouth that sold on Sept. 2. The ground had a PI of 146.3.

“That got the attention of some outside investors and we sold it to a guy with farming interests in California, Arkansas and Illinois,” Adkisson said. “We’re seeing the strongest per-acre prices we’ve ever seen and we’re seeing more outside interest. I think that’s due a lot to the technology we use to market these properties online and that sort of thing.”

Adkisson said the interest being shown by outside investors could help minimize any expected price correction for Class A farmland.

“The commodity prices are a big part of it and there is not a lot of money being borrowed,” Adkisson said. “I think if we do have a correction, we’re not going to see a real radical one.”