Illinois farmland prices increased by 16 percent in 2011, and farm experts say it’s not a real estate bubble. Buyers could have expected to pay an average of $5,700 per acre in 2011, up from $4,900 in 2010. Prices were higher in portions of Northern and Central Illinois. Gary Schnitkey, a farm economist at the University of Illinois, says the market is likely responding to historically low interest rates.
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“Interest rates serve as an indicator on what you can get on other investments,” he says. “When other investments’ returns are low, people tend to stay in farmland.” Schnitkey says those who buy farmland are usually farmers, and they keep their land for the long haul – using the land as an investment property is uncommon. Schnitkey expects prices to decrease this year as commodity prices level off.