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n. Illinois | the appraisal industry on farm land is still using the 3ish cap rate. Its the rate that they see when they compare that $15,000/ac land sale to the cash rent they assume for that ground. Sometimes its under 3%. Risk free returns are now over 4% so how much more should you get for taking on risk? I don't have that answer other than its not 3% anymore.
Now we all need to acknowledge that land values are a lagging indicator, So until there is a correction in terms of cash returns on a per acre basis and folks are no longer able to find fixed rate loans at under 7% then we will no see the land values correct. 2022 was better than 2021 for many grain operators that I saw so I do not anticipate the land values to correct until the upcoming fall sales season. | |
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Land value's what causes them to change
