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Land Prices Beginning to Soften
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GreenStone’s annual benchmark analysis offers new insights



 

Land Prices Beginning to Soften


The diversity of agriculture production in Michigan and northeast Wisconsin is reflected in the annual benchmark land value analysis conducted by GreenStone Farm Credit Services. The varying agricultural land uses, as well as recreational land and home sites, and commercial and industrial developments requires values to be determined on a localized level. This benchmark analysis, conducted by GreenStone’s internal audit team, continues the appraisals first reported in 2006.

This year’s report found the year-over-year change in valuations ranged from an increase of 6.7 percent in the transitional land around major cities like Green Bay, Wisconsin, Grand Rapids, Michigan, the Howell/Ann Arbor, Michigan corridor, and Detroit, Michigan area suburbs where housing construction continues to surge; to a negative 7.7 percent in southwest Michigan. Only three of the 14 benchmarks showed an increase in land value, with the common thread being non-agricultural influence.

"Considering current and historical data, it appears land values will continue the regional benchmark trends of the past two years, declining for uses for production agriculture, indicating Class A soil remains in high demand while lower quality land values will continue to soften as they have these past two years,” says Joe Hickey, vice president and chief appraiser with GreenStone.

Traditional Crop land

The benchmark study includes several traditional row crop parcels across the Lower Peninsula of Michigan and northeast Wisconsin.

“After five years of fairly stable prices, results show a softening of cash crop land values, with moderate declines or staying stable, including cash rents, but not to the level anticipated given the three-year weakening in farm commodity prices,” Hickey says.

The western region of northeast Wisconsin saw the second consecutive year of stable benchmark value, following consistent growth the previous nine years. Since 2006, this land has increased from $197,000 to today’s value of $375,000. In the southeast part of the northeast Wisconsin territory, crop land value decreased for the second year after 12 and 18 percent increases in 2014 and 2015, to today’s appraised value of $534,000.
 
In Michigan there was a 7.7 percent decrease in the southwest and 7 percent decrease in mid-Michigan, bringing their values to $384,000 and $424,000 respectively. Cash crop land in southern Michigan went unchanged for the second year holding at $280,000, a 40 percent increase since 2006.
 
Michigan’s northern thumb area continues to hold the highest value of the regions at $622,000 ($7,780 per acre), marking a 1.2 percent decline from 2016. The Saginaw Valley cash crop land in Michigan, on a per acre basis, had a 2.9 percent drop to $6,419, coming down from the highest value recorded in 2014 at $7,406.
 
Dairy
 
The appraisal of the Michigan dairy with 1,550 free stalls on a 40-acre site showed a 7.6 percent decline to $4,760,000, down from the 10-year high of $5,200,000 in 2015. The 60 tie-stall and 40-acre site in Wisconsin showed no change, holding at $318,000.
 
Recreational
 
The 80-acre recreational benchmark land surveyed in northern Michigan saw a slight increase in value after two years of decreased value, coming in at $128,000 ($1,600 per acre) up from $120,000 in 2016.
 
According to Hickey, the upswing in recreation land value can be attributed to a stronger overall economy and increasing interest in recreational land, particularly with water frontage.
 
Transitional
 
GreenStone monitors three areas in the transitional land category: southeast Michigan; Lapeer County, Michigan; and Brown County, Wisconsin. Transitional land is defined as a property between uses with the current use likely to change.
 
The 40-acre tracts in Michigan showed modest gains with the land in the southern part of the state increasing 5.3 percent over 2016, to a value of $316,000; this increase follows double digit growth in 2015 and 2016. Transitional land in Michigan’s thumb (Lapeer County) showed a slight up-tick of 3.4 percent to $163,000, reversing the decline in prices the past two years after the 10-year high of $191,700 in 2014.