As real estate values continue to decline nationwide, Iowa farmland is becoming more valuable every day.

A survey released this month by the Iowa chapter of the Realtors Land Institute (RLI) showed a 6.6 percent increase in farmland values in just the last six months. Farmland values rose 17.6 percent in Iowa throughout the course of the last year, and an incredible 70 percent over the last five years.

The increase in land values has affected much of Iowa.

RLI consultant Troy Louwagie conducted the survey. In an interview with the Iowa Independent, Louwagie said, “The number one factor is high commodity prices.”

“We have $5 corn and $12 beans, and that has pushed up farm profitability levels. Farmers have made money the last couple of years and cash rents have gone up,” he said.

The report also says that expansion of the renewable fuels industry, good crop yields, and “positive attitudes about agriculture” have also helped boost land values.

But the report also warns that certain factors could negatively affect farmland values in the future. Such factors include an increase in fuel and fertilizer costs and decreasing returns in the livestock industry.

The RLI report shows a continuation of a trend toward higher farmland values that has been ongoing for the last few years. Iowa State University’s 2007 land value report, released last December, showed an average increase in value of approximately $700 per acre for Iowa farmland last year.

Louwagie said that a lot of the sales have involved large farms getting larger rather than small farms simply changing hands.

Farmland values have remained high despite an all-out crisis in other real estate markets — particularly housing — across the country. CNN reported last week that the pace of new home sales nationwide fell to a 17-year low in August. And that decline in sales continued despite a drop in average home prices.

From CNN:
Sales fell as prices continued to drop. The median price of a new home sold in August was $221,900, down 5.5% from $234,900 in July and down 6.2% from $236,500 a year earlier. Prices for new homes on the market were at their lowest level since September 2004.

This decline probably doesn’t accurately capture the weakness in prices for new homes, as about three out of four builders have reported having to pay buyers’ closing costs or offer other incentives such as expensive features for free in order to maintain sales.

Even Iowa farmland that is close to urban areas, which one might expect to be developed for non-agricultural purposes, is lagging compared to rural land.

“In my opinion, we have seen farmland around the urban area soften,” said Louwagie. “Usually, they move in correlation, but we’ve actually seen those levels soften while farmland that’s strictly for agriculture has continued to increase. That’s unique, we have not seen that in a long time.”