2016 Indiana Land Values Decline in Farm Credit Analysis

Indiana farmland value down for 2016

Indiana farmland value decreased by an average of 7.1 percent in 2016 according to the newest report from Farm Credit Mid-America. The report also shows a slight drop in Kentucky but increases in average value for Ohio and Tennessee. Dennis Badger, Vice President Collateral Risk Management explains the fall in values comes just a few years after hitting all-time highs.

“Actually in 2010 is when we’ve seen one of our largest spikes where Indiana showed a 27 percent increase,” he said. “This past year, in 2016 the overall average for Indiana was 7.1 percent decline. The prior year, 2015 it was a 2.7 percent decline, so the rate of decline has increased for Indiana.”

Farm Credit Mid-America breaks Indiana into three regions with the largest drop in values coming in the north.

“The northern region suffered about a 12 percent decline, the middle region suffered about a 7 percent decline, and the lower region was about a 2 percent decline.”

As to the variation by region, Badger said “I think part of it just goes back to the types of farming operations that would be present, whether it’s large operations as well as the commodity that they’re looking at and even soil types factor into that as well, along with weighted average productivity indexes and things of that nature.”

Does the drop suggest a coming crisis? Badger says no.

“Real estate like everything is cyclical, so when you had the highs of 2010 and the 27 percent increases, you’re also going to see a retraction where it comes back again, almost like a pendulum. So, the pendulum is heading back the other direction. It’s certainly not like a balloon that is popping I’ve heard as an analogy from the housing crisis, the housing bubble. We don’t think it’s anything near that magnitude. Certainly, some of the other factors such as commodity prices right now, the net farm income is certainly another concern. So, there are some variables that people want to be mindful of.”

Badger doesn’t see this retraction going anywhere near the last housing or farm crises.

FCMA researched and analyzed over 8,996 sales in 2016 in Indiana, Ohio, Kentucky and Tennessee to arrive at their final report, which showed an overall 4-state average decline of .9 percent.

Looking forward, Badger expects downward pressure on cash rents in 2017, along with increased marketing time for listed properties, a decreased number of properties on the market and stable to declining farmland property values for their four state area.