Dane County, Wisconsin - Chapter 6: Land Values, 1905

In discussing the values of land at the various periods it is necessary to deal with data gathered from many scattered sources and differing widely in trustworthiness. Anyone who has given the question of real-estate values serious consideration is aware of the fact that the subject is a slippery one. Politicians, and even historians, talk glibly about the rise and fall, or the stability of farm values, without giving any basis for the generalizations, and if the present treatment does nothing more than to show unmistakably the character of the matter that must be wrestled with before dogmatic statements should be made, it is felt that some purpose has been served. Not that it is impossible to arrive at definite results; by no means; but that unusual care must be taken, and the figures must be criticised, corroborated, and subjected to conscientious analysis before conclusions worthy of the name can be reached. To begin with, it seems desirable to pass in review some of the more weighty obstacles which confront the man who has occasion to pass judgment on the value of a farm as compared to the difficulties in valuing personal property. It may be said that in the case of valuations for assessment of taxes it is the latter, not the former kind of property that causes the trouble. Very well; but the question of finding personal property and of putting a fair price on it when once it is brought to light are two very distinct propositions.

The kinds of personal property which are considered fit subjects for taxation are, almost without exception, such things as are daily bought and sold on the market. Perhaps an importer of fine woolens may hoodwink the custom house officer into listing it for a third of its actual value, but this is a fault to be charged to the clumsiness of the system as well as to intrinsic dif- ficulties involved in judging cloth. The same can be said of merchandise in general ; it also holds good in the case of bank stock or live stock - ^they are daily and hourly put upon the market in large or small quantities as circumstances may determine and what they bring may be taken as their real values. And will not the same hold true of real estate? It will, unquestionably, except - and the exception is the all-important thing to be understood - ^that land is not normally a kind of property to be bought and sold in the ordinary course of business transactions which the wants of man and the division of labor make necessary. For the most part the sale of land pre-supposes a change of business or a change of residence, which is entirely wanting in the usual buying and selling of chattels. This is entirely true of rural real estate however it may vary in the case of cities. Very few farms are the subject of speculation, though they are sometimes so considered when held for long periods by non-residents as permanent investments. Another difficulty comes in the matter of classification; cattle, grain, groceries, what not, can be put into grades and quoted at prices with reasonable accuracy, but in grading land only the roughest outlines can be set and even these must be elastic or they will be obliterated by over-lappings and exceptions.

Another difficulty, and this probably as serious as any, is in the records of sales. The carefulness and accuracy with which records of transfers of land are made may seem at a glance to make it possible to investigate this phase of prices more easily than in the case of personal property, but when the purpose of the record is considered the balance is found on the other side. When even so loose an authority as a newspaper quotes wheat at fifty cents, and calico at ten cents, at a date now out of memory, it may safely be assumed that these prices are approximately correct. In the first place there are probably no reasons for deliberate misstatements ; more than likely the accuracy may be tested by comparison with other quotations. And, moreover, the sole purpose of publishing the price-list was to let it be known that goods could be bought and sold for the sums named. On the other hand, a piece of land IS sold, and the deed, containing a statement of the consideration, is recorded by a county officer and the record carefully preserved. But the ultimate reason, in fact all save ^he only reason, is to furnish proof that the farm was sold by one person to another, each of whom was competent to be a party to such a transaction, and each properly identified as the person whose name appears in the instrument of conveyance. As to the price named it is a mere form to satisfy one of the fundamental requisites of a contract, that is, that there n\ust be a consideration.

We find, then, that the consideration named in the deed may bear almost any possible relation to the price actually paid. In the concrete instance of Dane county it will be seen by a mere glance at the early record books, that there is no possibility of tracing any considerable proportion of sales for those years. The complications resulting from partnerships when small undivided fractions of widely scattered pieces of land were sold, or worse yet, traded for merchandise in Baltimore or bank stock in New York, render the whole mass unintelligible. So dropping these we turn to smaller individual sales and the confusion, though very much less, is still sufficient to preclude any possibility of satisfactory results. A man sells a piece of land, classed by the assessor or census-taker as improved land; the improvements may vary from a mere trifle to the major part of the value. Nor is this all ; there may have been some personal property transferred, either one way or the other, and pride, carelessness, or dishonesty may have prevented any mention of it in the deed. In going over some hundreds of records in the office of the register of deeds it was found that out of every hundred there were a few obviously unreliable, not to mention such transactions as involved chattels. For example, a farm is sold three times within a year, and although land is known to be advancing in price, the sum named in the deed remains the same. This is not a clear case of failing to name the sum actually paid but in all probability it is such. Another class of transfers which must be dealt with cautiously are those where land is transferred from one to another member of the same family, yet after the family is gone from the vicinity it is unsafe to label every transfer of Smith to Smith as one of this class, and again, even the suspicion of such a case may be hidden by the different surnames of persons who, after all, belong to one family. A mother deeds two pieces of land to two married daughters, the price named is a nominal one taken at a hazard, or merely to strike a rough balance of accounts and yet these figures will slip into a list made up by a serious investigator for scientific purposes.

Shall we then conclude that it is a hopeless task to arrive at credible results in the rise and fall of land values? Not at all. It does, however, appear plain that no one method is without faults, and therefore that all possible checks and comparisons are needed, but more than all these, the worth of the results depends almost entirely on the knowledge, patience, and skill of the one on whose judgment the elimination, balancing, and computation depend.

It seems reasonable that the history of the transfers of a given piece of land, about which the exact conditions of each transfer may be known, is much more valuable than an aggregate of sales where little or nothing is known in detail ; and also that the recollections of men who helped to make the history of the times, and whose business it was, in part at least, to know the selling value of land, is testimony worthy of careful consideration. It is in this composite way that the material for the following discussion was obtained. The elements entering into land values will be touched upon at the close of the chapter.

To begin with we will notice the significance of the aggregate sales and average prices for a series of years as reported by the register of deeds.®**

Before 1845 little land sold under warranty deed, and the land that did change hands was for the most part in the nature of transfers of preemption rights or a sale of the improvements where the land itself was reckoned at government price and the purchaser of the improvements took his chances of getting it whenever it should be put upon the market. By 1845 many mortgages fell due and in very few instances was the mortgagor ready to meet his obligation and this must have been the cause of many transfers. There was so much fairly good government land still to be had it is unreasonable to suppose that the land, aside from the improvements, could be worth much above the original dollar and a quarter an acre. This supposition is well borne out in the price for which land sold, for on an average there was a margin of but one dollar fifty-nine cents to include both the value of the improvements and the rise, making it probable that the rise was practically nil. Ten years later the matter had a decidedly changed aspect. The reasons are apparent : government land had ceased to be a factor in land values, since little of a desirable quality remained ; the excitement over wheat during the boom of 1854 resulted in a marked rise in land, and although the boom was exceedingly brief, a considerable part of its force was expended between September i, 1854, and the following spring, that is, within the year for which the figures are taken. Thus in all likelihood the average price is not only higher than for any previous year, but the rise during the year ending September i, 1855, was proportionally greater than for any previous year. The inability to meet payments was still a great factor in land sales; in fact, it was during the 'so's that the influence worked out its greatest results, and, as is often remarked by the oM settlers, a comparatively small proportion of the pioneers kept the land first entered. They sold out when compelled to do so, and moved to a location a little less desirable, or to one where a farm could be had on time, and began again.

In 1865 the results are interesting. The number of sales was less than half that of 1855, while the price seems to have advanced in about the same ratio as in the preceding decade. But it must be remembered that this seventeen dollars an acre was reckoned in greenbacks, which were worth about seventy cents en the dollar. Thus it is entirely fair to say that land had not risen over about two dollars per acre, and this would certainly not exceed the value of the improvements made since 1855 ; or in other words, land had failed to make any rise whatever. The explanation is simple: land had faifed to respond to the general rise of prices because the farmers had gone to war, leaving an inadequate force to carry on the ordinary farm operations; the general unrest of the times led many to seek new homes in the farther West, thus putting their Wisconsin farms on the market at a time when buyers were few. Wheat \^as not yielding returns for the immediate expenses of raising; it could not compete with the new lands of the West, and other crops were not sufficiently well established to create a demand for land on which to grow them ; as a result, much old wheat land was not wanted at any price.

This might seem to mark the year as an abnormal one, but when it is remembered that the same conditions had existed for three or four years before, and continued till near the close of the '6o's, it appears to be a fair example for our purpose. It is the year 1875 that is farthest removed from the normal, for here we find the sales to be less than one-seventh as many as ten years before. Again the reasons for the situation are not obscure. The price of land had made a considerable advance as business recovered its stability in the early '70's. With the collapse of 1873 sales became few, but did not reach the lowest ebb till two years later, by which time the discouraged farmer was rejuctant to put any more money into land, and yet he was equally reluctant to sell at a sacrifice. This is reflected in the figures of the table ; the few farms sold, brought a fair price.®^ Emigration to the West had continued, but this was partly offset by the new system of farming, and the inventions in agricultural machinery, both of which enabled a farmer to manage more land with a given amount of labor. It was, then, conservatism rather than any active agency that kept land, from sinking below the prices reached in better times,®^ and the new elements in farm economy were still too rudimentary to force the price up.

-2 In 1880 there were twenty-three thousand, eight liundred seventy-two acres sold at $20.91, but this was on a gold basis and, therefore, does not represent a decline. I i ; i

In the first place, the number of sales is large and therefore the percentage of error coming from the unusual instances should be small. Another matter of consequence is the comparative insignificance of the improvements throughout this period. True, some of them were good, but on an average, they were far from it, and thus the upper and the lower limits of prices were not very far apart. Land could be classified as arable and not arable, and within each of these two classes the variation was not great. Since about 1875 these classes have almost disappeared, as dairy farming has made both swamp and hilly land more valuable than ever before, and the more desirable lands are carefully differentiated according to the crops which they produce to the best advantage. Houses and bams, fences and windmills, and improvements of every description have added to the value of many farms from twenty-five to a full hundred per cent. The chance element is thus much greater for the later years, yet the results do not appear meaningless.

By 1883 business was again brisk and land was once more in the ascendency, 32,929 acres being sold at an average price per acre of $32.24. The year 1885 shows a little drop from this in both acres and price, but the change is not sufficient to warrant any generalizations. Perhaps it was due to the fall in the price of farm produce, but just as likely the discrepancy would be explained by a minute classification and comparison of the land sold. It was at this time that tobacco land firs.t began to command a premium ; also the hilly land in the southwest part of the county rose in price as never before. A year is a short period in the history of land and it often happens that for a given year there will not be over two or three sales in one town, while a dozen are made in a town adjoining, with no visible reason, and the next year may see the matter reversed. The sales of 1887 seem to show a decided drop in price, 9,299 acres selling at twenty-nine dollars. In the first place, the sales are small and it is possible that a third of this was swamp land, which always goes at a low figure ; but without guessing, the apparent decline can be shown to be nothing formidable. The report of the register of deeds gives the sales by towns and we find that more than one-fourth of the land sold, 2,521 acres was in five of the poorest towns of the county, and this land averaged less than seventeen dollars per acre, while in five of the towns where land was high, only 1,046 acres changed hands, but the price was more than forty-five dollars per acre. The average taken within a single town means little enough, but when the average involves towns lying in districts so unlike as the tobacco section and the dairy section^ of Dane county, the vagueness of the result is obvious. In reality the prices of land in both these sections advanced between the years 1885 and 1887, and it was the mere incident of many sales in the one and few in the other that gave the appearance of decline. In 1890 the sales were well distributed among the towns, and the price was approximately as in 1885. Between 1880 and 1885 there was much excitement over tobacco growing, and choice land for that purpose sold for one hundred dollars an acre. During the last half of the '8o's the tobacco business experienced a relapse, and this accounts for the small number of sales in that district, while at the same time the interest in dairying continued, and in consequence there was a marked movement in lands suitable for that purpose. A general averge conceals these facts and appears to show a decline in all land values.

Coming to the latter part of the '90's, we have some excellent data on the subject of values. The Wisconsin State Tax Commission has calculated the value of all property of the state, and its method of computing farm values is no doubt as reliable as any yet in use. Thev took the whole number of sales as reported by the register of deeds for the years 1895 to 1899, inclusive, and after eliminating such as were obviously not bona fide sales, the acres sold in each town were taken year by year and the rate per cent, of assessment to selling price computed. This was done for each town for each of the five years. Then an average rate was struck for the period and with this ratio of assessment to selling price, or true value, and the total assessed value, the true value of all land of the town was found, the process being merely a case in simple proportion. With this elaborate process it turns out that the average value of land for the entire county during the five-year period is forty-seven dollars per acre. This, it will be noticed, is a trifle higher than it would appear from the prices based simply on the assumption that actual sales may be taken as , representative, but the difference between the two results is not serious. No doubt the percentage of assessment to selling price gives the better basis for estimating values, yet for the purpose of showing the general movement of prices the average of sales seems fairly satisfactory; at least the same percentage of error which appears in the results by this method for the period 1895 to 1899 would not be sufficient to change the general trend, and for reasons already given it is believed that the error would be much less over a good part of the early period. Again it may be said that land has never yet declined in price in this county. The average for 1896 is higher than in succeeding years, but as shown for a previous year, this deceptive average comes from an uneven distribution of sales. In the few dairy towns where land is cheap, eight hundred acres were sold at about twenty-two dollars per acre, while in four towns in the opposite corner of the county more than three times as many acres changed hands at fifty-five dollars per acre. In the years following, when the price seems lower, the sales in the dairy section were two or three times as great, and in the other section much less than for the year 1896.

It is of interest to notice that the valuations of real estate for the four distinctive tobacco towns fall below that of four other towns where almost no tobacco is raised. This, however, may not be considered a fair comparison, as the town of Madison, where proximity to the city gives an added value, was included in the latter group; but taking four towns in the northeastern part of the county, where there is not even a village of any consequence, the price of real estate falls but little more than two per cent, below that of the tobacco-growing section. Surely this is conclusive evidence that tobacco growing is not responsible for any considerable part of the advance in farm values ; yet, as before admitted, the very choicest of tobacco land sells higher than any other.

In looking over the records for some forty or fifty pieces of land, with data as to improvements and quality of land, it is remarkable that the results coincide closely with those reached by the statistical treatment used above. The prices in the individual cases are much higher, but that is because no swamp or hilly land was considered. Swamp land is still sold as low as five or ten dollars per acre, and some of the roughest land is hardly salable at all. The choicest land is worth nearly one hundred dollars an acre where improvements are an inconsiderable part of the value, and a great deal of land with good improvements, say three thousand dollars worth on two hundred acres, sells for eighty dollars, leaving the bare land at sixty-five.

With land at this high figure can it go still higher, or must it cease to rise? In the first place, the causes" of the present high price are of interest. No one pretends that the average farmer can make actual returns on the investment in the highest-priced land ; far from it. It takes the best of them to make more than the current rate of interest. Yet land not only shows no tendency to drop in price, but persists in climbing steadily upward. In the first place, the entire agricultural community has implicit confidence in the stability of farm values ; on the other hand, they expect a decline in the rate of interest, and they often express the belief that an investment in land, where the returns are three or four per cent, a year, is sure to be better in a term of years than twice that rate from other investments, because of the rise in the value of the land itself, and because of the comparative safety of land as an investment. There have been not a few instances of men who have felt that land at eighty dollars an acre was not yielding proper returns and so disposed of it, but on getting hold of the money found no better place to put it, and again bought land at a price as high as that received. Land, above all other kinds of property, is the best place for the man unfamiliar with business to invest his money. The owner of land has a honie; living in the country is much less expensive than in the city or even in a village ; and besides, many people prefer to live in the. country. The constant increase of the conveniences of farm life must also be a factor in keeping the price of land at a high level. Just as improved street-car accommodations raise the price of suburban property, so the telephone, now to be had almost as cheap in the country, as in town, the free delivery of rural mails, the improvement of country roads, the lessening cost of comfortable and attractive carriages, must result indirectly in adding value to the farms. The cheapening and improvement of farm machinery gives a chance for added net returns, and perhaps more than any or all of these influences the constant falling in interest charges makes land a favorite investment. What effect the latent pos- sibiHties of the West have in store for us will not be known until irrigation is reduced to a more scientific basis and extended to fields as yet untried. This might conceivably have somewhat the effect on the Mississippi Valley that the latter had on the farming of the eastern and middle states, but at present the limit of the upward trend of land values is not in sight.