An Analysis of Historical Illinois Farmland Valuations

Illinois farmland prices have experienced a dramatic rise in recent years, far outpacing historical rates of gain. Some have pointed to these large increases and think that land must be overvalued. Since 1950, price trends can be broken down into five distinct periods. These periods exhibit differing characteristics which are examined and related to present day valuations. Valuation metrics, including capitalization rates, capitalized values, the price to rent ratio and farm profitability trends, are analyzed. Real inflation adjusted returns are compared to nominal values since these paint a much more accurate picture of gains realized over time by holding farmland. This study also discusses effects past changes in interest rates have had on land prices and explores the potential that interest rate changes may have on farmland values going forward