How Are Interest Rates Impacting Farmland Sales?
It’s no secret that interest rates have gone up. Over the past several years, we’ve gone from rock-bottom financing to some of the highest rates in a generation. What have changing rates meant for farmland buyers and sellers in Minnesota?
“Lower crop prices and higher interest rates have had a significant impact on our land market in recent years,” reports Jeremy Fluegge, a certified general appraiser for Compeer Financial covering the counties of Sibley, Nicollet, Brown, and Cottonwood in South Central Minnesota.
Land sales volumes are flat or lower than expected
“Buyers are becoming more selective about what they purchase and are focusing their search on farms closer to home,” Jeremy says. “We don’t know what will happen with commodity prices. Crop corn and bean prices have significantly decreased compared to the previous year. That, combined with higher interest rates, means buyers are more cautious than before.”
After several years of rapidly increasing land values and sales in South Central Minnesota, we may have reached the top. Jeremy notes that some of his areas with limited sales activity continue to show strong sale prices, while other areas that have experienced good sales volume over the past year or so have seen prices remain flat or even slightly lower than expected.
High interest rates mean less construction too
Over the past few years, supply chain issues, high demand, slow turnaround and expensive materials have all caused roadblocks for operators who want to invest in their farms.
“Construction costs have come down slightly compared to recent years, but now high interest rates are making it difficult for producers to expand or update their operations,” Jeremy explains. “We’re seeing less new construction and more remodeling of existing facilities.”
Get an appraisal to buy or sell with confidence
For anyone looking to buy or sell farmland, Jeremy advises getting an appraisal. He explains, “Especially when the market has so many uncertainties, it’s more important than ever to make sure you get an appraisal and know that you are making a smart purchase or selling for the right price.”
Appraisals provide detailed evaluations completed by experienced appraisers to help you understand the estimated value of a farm, plot of land or rural residential property. Appraisals are recommended whenever you buy or sell land but are also helpful for estate taxes and financial planning purposes.
For more information and to sign up for our monthly newsletter about agricultural valuation, visit our Appraisal Services page.