Alternative Ways to Index Farm Real Estate Values

摘要

The current (modified-Laspeyres) formula for determining farm real estate value indexes would improve through using a more frequent weighting scheme. Updating the acreage weights every 5 years instead of every 10 years would better represent current land-use patterns and provide more consistency with the U.S. Department of Agriculture's (USDA) dollar-value farm real estate series. The report examines two ways of improving USDA's indexing methods: altering the modified-Laspeyres formula or switching to a Divisia formula. The modified-Laspeyres formula with weights updated every 5 years is recommended because it is more understandable by users, while the statistical benefits of the Divisia formula are uncertain for a farm real estate value index.