By Justin Connolly, Certified General Appraiser at FCS Financial
What are land values doing?
We led with this question in our 2022 land values article and it’s still pertinent in 2023. People in general want to know what Missouri land values are doing. FCS Financial appraisers complete an annual study of 30 benchmark farms to evaluate the trends for farmland and recreation land. Due to the different land types across Missouri the benchmark farms in the study are split into regions of northern and southern Missouri.
An overall summary of the 2023 study indicates, on average, farmland and recreational land values saw a positive change but with a more moderated change from the high appreciation changes shown in the 2022 study.
Vice President of Appraisal, Christina Dicken said, “After seeing a rapid rise in land values over the past two years, sale prices appear to be stabilizing in 2023. While the values are holding steady, activity on local multiple listing services is indicating a 20-25% decrease in the number of closed farmland sales year-over-year.”
Northern Missouri
Northern Missouri has a higher degree of cropland but still has a good mixture of pasture and recreational land. Recreational land may consist of all wooded acreage or a mixture of cropland, pasture and woods.
There continues to be elevated demand for land to purchase, but inventory of the different land types for sale in this area remains low, similar to what was seen in the 2022 study. However, we did see several farms sold via online and in-person auctions and through real estate brokers during the study period.
“Auction is still the best method to sell highly productive farmland while the lower quality cropland farms along with pasture and recreation tracts have had difficulty meeting seller expectations,” said Ryan Boeckmann, Vice President, Appraisal. “In the past month, there has been an increase of properties not selling at auction, which could be due to seasonally low demand or the need for increased marketing time through a traditional listing.”
Considering the lower land supply for sale there has been some demand to purchase higher quality pastureland to convert to cropland in this area. During last year's study, there were many new record high prices, but we didn’t see that as much in the 2023 study. Buyers were a mixture of active operating farmers, farm investors and out-of-state buyers.
The benchmark farms with a higher degree of cropland use in this regional study saw an annual average increase in value of 7.97%. The benchmark farms with pastureland and recreational use in this regional study saw an annual average increase in value of 3.95%.
Another rural real estate observation for this area is the continued demand for rural acreages with homes and residential development near the urban areas. Rural broadband and commuting distances to urban areas of work are a few of the driving forces of this demand.
Southern Missouri
Pasture is the most prominent agricultural land use in the area with cropland having a smaller percentage of land use. In southern Missouri, recreational land consists of wooded acreage as well as marginal quality pasture and cropland.
The supply of land is limited in most areas. Demand for good quality cropland and pastureland is stable to strong, and demand for recreational land has been tempered from the study in 2022. Buyers were a mixture of current operating farmers, farm investors and out-of-state buyers.
The benchmark farms that make up this regional study area saw an annual average increase in value of 5.39%.
In the previous report, rural home demand was strong in this area. This year, appraisers have seen rural home developments stabilize. Demand is still there but not as aggressive as in 2022.
Market conditions during the 2023 study period
“The high interest rates have resulted in less willing buyers at the current land values, and it seems as if the marketing and exposure time has increased in comparison to a few years ago,” Boeckmann stated.
FCS Financial appraisers saw interest rates and input costs as reasons that land values saw some stabilization in this reporting period. However, the continued elevated demand for some land types, limited land supply, and buyers with equity and cash who continue to make purchases are supporting factors for land appreciation.
We are sure this will continue to be a hot topic throughout Missouri and the Midwest for the next 12 months. If you have any questions or would like to speak with an FCS Financial appraiser or loan officer, contact the office nearest you.
FCS Financial employs full-time, certified agricultural appraisers. This article combines observations seen by appraisers from northwest, northeast, central and southern Missouri in 2023.
