One might think that severe drought would slow land values, but that has not been the case so far. "We've never had land values this high before," University of Nebraska Extension educator, Tim Lemmons, told producers at a landlord and tenant workshop in Bloomfield recently. "And we probably haven't seen the top of the market yet."
In 2012, land values climbed an average of 32% statewide, with the greatest hike in the northeast region, Lemmons said. "In the southwest, even with substantial water issues, we are still seeing increases," he said. With these increases in that region, Lemmons said, "Water will become a major public policy issue."
Land values have gone up dramatically with commodity prices. "In a five-year period, we've seen a 132% increase in values," he said. Yet, the percentage of annual net return on investment by value of the land has declined from 5.5% return on dryland Nebraska ground in 1992, down to only 3.5% return on dryland farm ground in 2012, said Lemmons.
Land is still a good investment, while other investment opportunities have been limited in recent years, he said. Farming has been profitable. Interest rates are low, and there is a general lack of land for sale. Sometimes, when a farm comes up for sale nearby, it may be a once in a lifetime opportunity for a neighboring farmer to purchase that property, Lemmons said. Land in Nebraska is only sold once every 100 years in many cases. He said, "Human characteristics play a role in land values."
Many people believe that land values are being driven by current producers expanding their operations. Young people are not buying the farm land as a rule. "It is 60 to 80 year olds buying the land," Lemmons said. Over 43% of land in the state is purchased with cash, so they have the money available to them. "Land appreciates in value," he said. "It's stable. It's not going anywhere and it is a good place to put your money."
Lemmons suggested that land values will slow when other investment opportunities pick up again. "There is a lot of money and a lot of deep pockets," he said. "Be cautious. Don't get caught up in the moment. Get caught up in the trends, because the trends are more important."
If you'd like to learn more about current land values, contact Lemmons at 402-370-4061, or email email@example.com.