ND land appraisers see prices up 46 percent

FARGO, N.D. -- A North Dakota farm managers and rural appraiser group published its 2012 report this week, indicating an average 46 percent annual jump in North Dakota farm values in 2012, and a 28 percent increase in values in nearby Minnesota counties.

Charles Peterson, vice president of the farm management group for U.S. Bank in Fargo, is a board member for the North Dakota Chapter of the American Society of Farm Managers and Rural Appraisers report. He explains the report is based on professional observation and documented sales. North Dakota's strongest annual percentage increases by region were northwest (53), northeast (45), Red River Valley, (41), southeast (38) and southwest, (31).

While the report is a year-to-year record, it also shows a multi-year trend. Land values doubled from 2009 to 2012 in nearly all regions in the report, Peterson says. The survey shows individual county information, but the society does not disclose numbers of sales nor the number of acres involved in each sale. Peterson says each county may include as many as 25 to 40 sales, but some may be as few as two. The report divides some counties east to west or north to south because of significant productivity differences in geography.

Peterson declined to comment extensively outside of the numbers, but says he's attended numerous sales himself where "more and more investors" are looking at purchasing land because they hope land values and rental rate returns will beat other investments that aren't keeping up with inflation.

"They have more money sitting in CDs (certificates-of-deposit) paying less than 1 percent (annual interest). If you can pick up some land and get a return of 4 or 5 percent or more, including the appreciation, that's a smart thing to do."

Two counties in North Dakota -- Walsh and Richland -- had three sales averaged more than $10,000 per acre -- the first time publicly to Peterson's knowledge.

"I believe it," says Andy Swenson, North Dakota State University Extension Service farm management specialist, of the report. He says farmers are coming off of six pretty good years in crop production profitability, starting in 2007. "And 2012 will be the most profitable of all by a pretty good shake," Swenson says. "Their ability to pay is there. There is a lot of cash out there, but a lot of wherewithal" to buy land.

Interest rates are low, which means buying land is cheaper. Crop prices are still high. "And 2012 was a dry year, but everyone up here was impressed by the yields," he says. "And there were strong prices because of the drought in the Corn Belt."

Low interest rates also indicate the low returns on alternative investments for outside investors. "People are willing to accept a lower return on land than in the past simply because you can't get much of a return on money now," Swenson says.

Here are highlights by regions, which include Minnesota counties in the northwest and western counties near North Dakota, as well as Red River Valley counties:

Northwest Minnesota: Polk County was up 25 percent on the year, while Marshall was up 19 percent.

Western Minnesota: The top year-to-year increase was in eastern Becker County, which increased 110 percent, or more than doubled, but that was after a modest 13 percent increase in 2011, and a 2 percent decline in 2010. Western Becker county increased 58 percent, but after a 61 percent increase in 2011 and a 25 percent reduction in 2010. Curiously, Norman County showed a 27 percent drop in prices, after changes that were not available in 2011 and 2010. Meanwhile, Ottertail prices were up 34 percent.

Red River Valley: Sales values increased an average of 41 percent across the Red River Valley, according to the survey. Those are "overall very impressive numbers and a trend we hope can continue," Peterson says.

The survey divides the valley north and south.

Northern Red River Valley land prices increased in all counties, with highest annual percentage jumps in Walsh (66), Grand Forks, (57), western Polk (48) and Pembina (34).

Southern valley increases were led by Richland County, with a 72 percent annual jump, after last year's 2 percent decline, and a 23 percent increase in 2010. Other counties with larger annual percentage increases were eastern Cass (44) and Wilkin (39).

Northeast North Dakota: Sales values increased an average of 45 percent on the year, and are up 126 percent from 2009, according to the survey.

Annual percentage increases in 2012 were led by Foster (70), Griggs (68), Nelson (66), Benson (63) and northern Cavalier (57). Southern Cavalier County had 41 percent increases, but after leading with a 63 percent increase the year before.

Southeast North Dakota: Sales values increased an average of 38 percent on the year and are up 107 percent from 2009. Leading the charge for percentage increases in 2012 were Kidder (77), Sargent and Stutsman, (both 66), and Emmons and McIntosh (both 48).

Northwest North Dakota: Farmland sales values increased 53 percent in 2012. That corner of the state has seen a 131 percent increase since 2009 -- the biggest increase among the regions.

Counties leading the way with annual increases in 2012 in the northwest are Ward (92), McLean (87), Pierce (79), McKenzie (77) and Mountrail (71).

Southwest North Dakota: While Adams County showed a rare 4 percent decline in values, other counties showed big percentage increases, led by Dunn (66), Sioux (53) and Stark (52).