The Land Values 2021 Summary report, released by USDA’s National Agricultural Statistics Service, shows agricultural land values increasing at a rate not seen in nearly a decade.
This report and its contents provide one of many indicators of the overall health of the agricultural economy and help paint a picture of costs that farmers face as they negotiate rent levels for the near future.
Farm Real Estate Value
The U.S. average farm real estate value, a measurement that includes the value of all land and buildings on farms, clocked in at a record $3,380/acre. This 7% increase over last year represents a percentage change not seen since 2014 when values increased 8% over the previous year.
In looking at the dollar value of the change, this is a $220/acre increase over 2020, a level not seen since 2012. These levels vary significantly throughout the country, with the highest real estate values concentrated in areas of the country with larger volumes of high-value crops (think wine grapes and tree nuts in California), as well as areas experiencing upward pressure due to proximity to urban areas.
Much of the Midwest experiences higher levels of real estate values, followed by the South and Pacific Northwest, and finally the Plains and Mountain states. On a state-by-state basis, (excluding Northeast states with urban pressure), Nebraska, Kansas and Oregon all posted double-digit percentage changes over last year. These were followed by Texas, Iowa, California and South Dakota, each posting over 9% year-over-year growth.
Like the overall real estate value, average U.S. cropland values posted sharp increases in 2021, rising to $4,420/acre. This increase came in as an 8% jump over 2020, which was the highest increase in cropland since 2013 when it jumped 14%. In dollar values, this year-over-year increase was $320/acre, also not seen since 2013.
The distribution across the country follows a similar pattern as overall real estate value, with California and Northeast urban states claiming the highest average cropland values. Again, following that top category is much of the Midwest, followed by the South/PNW, and then the rest of the country.
The top three states in terms of percentage growth are Kansas, Nebraska and South Dakota, posting gains of 13.9%, 13.8% and 11.9%, respectively.
Similar to overall real estate values and cropland values, pastureland values posted strong gains from the previous year, coming in at $1,480/acre on average for the U.S. This is an increase of 6% over 2020, the highest increase since 2014, and follows six years of little to no increases in value.
However, the distribution of pastureland values across the country differs from the cropland value and real estate values. Instead of the Midwest and California, some of the more valuable state averages are concentrated in the South and the mid-South, with the Midwest and the Plains states making up the next group of higher average values.
Cash Rent Increases
NASS also recently released data on cash rents that farmers pay, and so far the strong increases in land values have not trickled down to cash rents. This tends to be more of a lagging indicator, and likely will be reflected in future negotiations that producers have with their landlords.
Average U.S. cropland rent increased to $141/acre this year, an increase of 1.4% over 2020. Irrigated cropland rents increased 0.5% to $217/acre, while non-irrigated cropland rents increased 1.6% to $128/acre. Cash rents for pastureland held steady from 2020 to 2021, coming in at $13/acre this year.
The recently released land value report from NASS showed sharp increases across the board in agricultural real estate values, cropland values and pastureland values. The average U.S. farm real estate value increased by 7% over 2020, while the cropland value and pastureland value increased by 8% and 6%, respectively. These increases are the sharpest in six or seven years, with little to no year-over-year increases in the last several years.
The same pressures that are affecting many sectors of the U.S. economy appear to be impacting farmland values as well. These levels vary significantly throughout the country, with the highest real estate values concentrated in areas with larger volumes of high-value crops, as well as areas experiencing upward pressure due to proximity to urban areas.
So far, the increases in land values have not yet been reflected in cash rents, with the national average cropland rent increasing by 1.4% compared to last year.
Micheal Nepveux is an economist with the American Farm Bureau Federation
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Buying and selling a house in midst of the COVID-19 pandemic was, for Denise Craine and her husband, an exercise in adapting to viewing rules that changed from one house to another.
”Every house had a sign that said ‘sanitize before you enter, do not open cupboards, do not use the washroom, no children allowed, no more than two people allowed plus your agent,’ ” recalls Ms. Craine, who runs a Toronto-based association management firm called Secretariat Central. “But then there were two houses that also had gloves in the entrance, and I remember (my husband) telling me later ‘I think we were supposed to wear those.’
“For viewings in their home, Ms. Craine and her husband added their own twist to pandemic protocols: all cupboard doors and drawers were left open to further dissuade touching and visitors were encouraged to disinfect as they went along, with bottles of disinfectant distributed throughout the house.
”So if they really wanted to inspect something, they could clean that surface before and after they touched it,” says Ms. Craine.
As the country’s vaccination rates continue to edge higher and there’s hope that COVID-19 will ease in the months ahead, a question for the real estate industry is what pandemic practices it should hang on to and what can go safely by the wayside.
George Filntissis, Toronto realtor with The Condo Kings – a Royal LePage Terrequity broker – thinks most of the safety practices that were either mandated or strongly recommended because of COVID are here to stay. As far as he’s concerned, that would be a good thing.
”I think that continuing to do things like wearing masks and social distancing would still make sense in the long run because we now know that they help keep us from getting sick,” he says. “I see a lot of people in my work and pre-pandemic it couldn’t be helped that if you met with someone who had a cold, you’re also going to get sick. Handshaking was constant so at some point you were going to catch something.
”Beyond the safety aspect, many of the current real estate practices that were either introduced or accelerated during COVID-19 have also led to greater efficiencies and convenience for realtors and their clients, says Mr. Filntissis.
For example, virtual viewings – which have been around in real estate for some time – have made it easier for prospective buyers to decide whether or not a place is worth visiting.
Shorter appointments, which became the norm during COVID to allow for sanitizing between showings, have shown to be just as sufficient as the typical pre-pandemic one-hour visits.
”Now it’s 15 to 30 minutes which, quite frankly, is more than enough time for most people to look through a place and ask questions,” says Mr. Filntissis.
A minor change with major impact has been the switch from purchasers picking up the keys to their new abode from their lawyer’s office to simply taking it out of the lockbox on the property.
”That is not going away,” says Mr. Filntissis. “It’s very logical, it’s very efficient.”
Courtney Cooper, president of Proptech Collective – a Toronto-based group that connects real estate professionals, technology entrepreneurs and city builders – foresees technology being integrated into more parts of the buying and selling process in real estate.
She points to digital documents and signatures, which allow all parties to sign and seal the deal virtually, as an example of technology that took off during the pandemic and will likely become part of standard practice after.
Digital mortgage platforms such as Homewise and Nesto, which help homebuyers find the best mortgage rates, will also be in greater demand post-pandemic, predicts Ms. Cooper, because they eliminate the hassle – and safety risk – of having to go to a bank to negotiate and sign a mortgage contract.
”I think we’re also going to start to see platforms that tie it all together so you can just go to one place to find and share listings, collaborate with your realtor, get a mortgage, sign the deal and transfer the deed,” says Ms. Cooper. “Right now you need to deal witheach person and company individually but over time all these parties will be more interconnected, and information that you’re providing to different parties today will be moved seamlessly.”
Virtual tours, whether offered as a 3D rendering of a space or through a video conference with a realtor, will also remain a regular part of what homebuyers can expect.
”We might even start to see self-touring here, like they do in the United States,” says Ms. Cooper. “We’ve been seeing more digital connected locks in the U.S., so access is automated, and people can come in using a passcode that’s set to work during a specific time.
”Some of these self-tours are augmented with smartphone audio tours that viewers can listen to as they walk through a property, says Ms. Cooper.
Virtual staging, which designs spaces using digital software that adds 3D furniture and, in some cases, even shows a property’s renovation potential by taking out walls or adding a swimming pool in the backyard, has been another winning technology during the pandemic.
Ibtisem Hamani, owner of Home Magic Touch Inc., a Toronto company that offers traditional and virtual staging services, says the latter accounted for about 10 per cent of sales before the pandemic.
“Then COVID hit, and it was unbelievable the number of orders we had for virtual staging,” she recalls. “The impact on our traditional staging business was immense – the split between our two businesses actually flipped, with virtual staging accounting for 90 per cent and traditional staging 10 per cent.”
In addition to the reduced risk and convenience of being able to show a home at its spiffed-up best on a digital platform, virtual staging offers significant cost-savings – less than $100 for one image versus between $2,000 to $3,000 for traditional staging, where rented furniture is trucked in, and a home is decorated professionally.
”We approach virtual staging like we do traditional staging – it’s all about the proper design and layout,” says Cos Pina, director of marketing at Home Magic Touch. “But the difference is that with virtual staging we have access to more than 3,000 pieces of 3D furniture.”
Ms. Hamani and Mr. Pina say they expect virtual staging to become even more popular in the post-pandemic future. They’re already planning to build on its success with an offering of augmented reality, where online viewers use virtual reality glasses for immersive walk-throughs of properties for sale.
While most home buyers and sellers seem to have embraced – or at least accepted – today’s COVID-driven protocols and processes in real estate, there are some practices that will likely not be missed after the pandemic is over.
Ms. Craine cites one example: when she was shopping around for home insurance, one insurer told her it would send over a property assessor who would inspect the house first-hand only from the outside. Ms. Craine and her husband would need to take the assessor on a virtual tour of their home’s interior.
”We would have to get on our phones and the assessor would direct us to parts of the house that he would want to see virtually,” recalls Ms. Craine. “I didn’t want to have to do that, so in the end we went with someone else.”
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