DENVER (KDVR) — Rural land values are climbing just as fast as urban ones, according to a report from the Kansas City Federal Reserve Bank.
Colorado’s residential housing market is now as tight and as expensive as some of the nation’s most expensive cities, ranking in the top 10 most unaffordable metro areas for households who earn a middle income. Home values have shot up 23% in the last year, according to Zillow. The average single-family home value is now $603,000.
Prices for Colorado farmland have gone up even further in some cases.
“Farmland values continued to increase at a rapid pace through the end of 2021,” the fourth quarter 2021 report reads. “Alongside sustained strength in farm income and credit conditions, the value of all types of farmland in the Tenth District was more than 20% higher than a year ago. The recent strength in agricultural real estate markets has been supported by strong demand, historically low interest rates and vastly improved conditions in the farm economy.”
The Kansas City Federal Reserve Bank does not keep track of farmland prices specific to Colorado, but it does track northern New Mexico, Colorado and Wyoming as a group. Non-irrigated farmland rose 24% in value over the course of 2021. Irrigated farmland rose 20%, and ranchland rose 14%.
As with the residential market, experts say the trend will only continue throughout 2022. Farmers, however, believe prices will come back down at some point. The majority of respondents quizzed by the Kansas City federal reserve said land is overvalued.
The value increase is, in part, a good thing for farmers who have seen crop prices rise in the last year and now sit on highly valued land. However, high prices make it harder for younger farmers to get started and add costs to the operation.
“Input costs may become too high for the average farmer to pay for and should this occur, crop production will decrease,” the report said.