Farm Horizons, May 2009
Ag land values have remained steady, but development land values are down
By Ivan Raconteur
Despite the wide fluctuations in other parts of the market, agricultural land prices have remained relatively steady, according to local county assessors.
“Farm land seems to be pretty stable,” Wright County Assessor Greg Kramber said.
The same is true in McLeod County.
McLeod County Assessor Sue Schulz said she has seen some slight increases, with agricultural land prices rising from about $3,500 per acre in 2007 to about $4,200 per acre in 2008. Although it is early in the year, Schulz said values in some areas have crept up to $4,700 per acre in 2009.
“We have heard talk that values are down, but we haven’t seen any indication yet,” Schulz commented.
In Carver County, Assistant County Assessor Keith Kern said true agricultural land values have been stable, but, like the other assessors, Kern noted that there have been very few transactions recently.
One area in which land values have been changing is in development land. This is land adjacent to cities where prices were at a premium during the housing boom.
“We have seen reductions of up to 50 percent on development land,” Kramber said.
He attributed this to the lack of new construction and to surplus inventory.
“In Wright County, we have 5,300 empty residential lots,” Kramber said.
With only 333 sales county-wide last year, it is easy to see the disparity between supply and demand.
The number of lots sold in 2008 was the lowest in years. Kramber said there were 902 sales in 2007, 1,595 in 2006, and 2,180 in 2005. The number of sales was consistently more than 2,000 beginning in 2001, with the peak of 2,319 in 2002.
When the number of sales dropped to 902 in 2007, it was the first time in a decade that the total had been below 1,000.
The glut of vacant lots is less of an issue in McLeod County, although Schulz said there is a huge amount of capacity in Glencoe and Hutchinson.
“Nobody is building. It is a wait-and-see game. We have held steady here,” Schulz said. “Wright and Carver counties are our buffer (from the metro area).
The value of development land has also declined in Carver County.
Kern said development land has come down 15 to 35 percent in the new assessment.
Values are down as much as 35 to 50 percent since they were pushed upward by the residential housing boom of 2005-2006, Kern said.
“That’s a heck of a correction, to say the least,” he added.
Kern said he has been talking to developers and looking at listings, and it appears that Carver County is doing better than other metro counties.
On the residential side, he said the county has “a tremendous amount of inventory,” but this is still less than there is in the other six metro area counties.
He also said Carver County did not see nearly as much market fluctuation as the other metro counties.
Like the other assessors, Kern said it is very difficult to determine market values when there is so little activity.
As a result, he said, “appraisers are being extraordinarily conservative” when evaluating properties.
All of the assessors expressed interest in how the economy and the housing market will fare in the months ahead. For now, they are doing the best they can with the information that is available, and hoping for more transactions on which they can base their assessments.