Investors Drive Land Market Higher Despite the Growing Season

Land prices reach all-time highs at sales this fall.

Published on: Dec 5, 2012

Common wisdom was that due to poor crop years and a devastating drought, this would be the year when land prices would top out and slip some in Indiana. Cash rents might also decline. Based on reports coming in from various sources, conventional wisdom appears to be wrong. It's not only wrong, it's 180 degrees off, with sharp increases noted in both land prices and cash rent so far.

In the land market there has been a considerable amount of land offered for sale in some areas, less in others. Several parcels have been sold in north-central and northwestern Indiana. One realtor who specializes in farm land sales speculates that people who own land in estates are willing to sell before the capital gains tax increases January 1, assuming Congress doesn't make changes to the proposed increase. With the reelection of the current administration, that seems less likely than it might have otherwise.

Land prices reach all-time highs at sales this fall.
Land prices reach all-time highs at sales this fall.

Selling prices for land in Tipton County, for example, have topped $11,000 per acre. Prices as high as $14,000 per acre for farms have been reported. There is also a difference in who is buying the land.

In the past couple of years, farmers were doing most of the buying. Now, investors are back in the market, driving up land prices and buying a reasonable share of the land. Speculation is that land may be the safest place to put money right now with the uncertain global and U.S. economy more likely to affect stock market values first, before it would affect land prices.

Some people are turning to gold, but not everyone. As one insider says, "You can't eat gold, and you can't grow anything to eat on it, either. There are better alternatives than gold."

At the same time, cash rent prices are also strong to rising. Reports of $400 per acre cash rent no longer raise eyebrows, even in southwestern Indiana, where rents tend to lag behind other areas. Most rents are still closer to $200 to $250 per acre based on reports, depending upon land quality. There is once again interest in flex leases.