Last year was a crazy year for the land industry. An unpredictable market and multiple natural disasters made 2017 hard to follow and made it even harder to predict what would happen next with the land industry.
Even with so many unpredictable factors, The RLI 2017 Land Market Survey, shows that last year was an overall good year for land real estate. In 2017, we had stronger economic growth. After a three-year decline, prices rose for all land types, and timber and greenfield development land are expected to post the strongest growth rates at three percent. Other surveys also prove it was a strong year for land real estate. As shown in the 2017 Land Values Summary, some regions thrived (the Pacific region saw an 8.7 percent increase in average value of real estate) while other struggled (the Northern Plains saw a 1.8 percent decrease). While overall, the value of United States farm real estate is averaged at $3,080 per acre (up 2.3 percent from 2016), some states faced drawbacks because of the natural disasters causing a decrease in hunting land sales. To learn more, we rounded up quotes from top ALCs across America about how their region’s land industry was influenced by 2017.
While U.S. lands typically sold slightly faster in 2017 than in 2016, some states saw a slower sales time frame. However, slower land sales doesn’t necessarily mean a lower need for quality farm land. In Wes Des Moines, Iowa, Sam Kain, ALC, who is the Assistant Vice President and Real Estate / National Sales Manager for Farmers National, noticed a slower time frame in the buying and selling process as a result of clients wanting to get the best possible value for their land. “Buyers of farmland are being more deliberate about their decisions, but farmers and investors are very interested in purchasing the right piece of ground that makes sense for them. Lenders are being more cautious in the amount of money they will lend on a land purchase, but there is still enough capital in the country to create demand for good land,” Kain said in an article published on Farm Forum.
Although sales might take longer than before, the value of the land in Iowa has remained strong. “Values for good land have been fairly steady during the past year and have even seen a slight increase since harvest,” said Kain.
In the Midwest, Aaron Graham, ALC, the President of National Land Realty, from Gretna, Nebraska, noticed a growing concern in the land industry about how the decline in hunting could affect recreational land sales. “Although I have seen reports in our Midwest area stating land values, specifically tillable farm land, have crept up slightly, transaction volume remains a long distance from the market peek in 2014,” said Graham. “There is some increasing concern for the recreational/hunting lands sector from a recent U.S Fish and Wildlife Services report, which states that over the last five years the number of hunters across the U.S. has declined a whopping fifteen percent.”
Not long ago, the Midwest held the most expensive hunting land per acre (averaging about $2,975 per acre, according to a 2015 Whitetail Properties post). Could tillable farm land replace hunting grounds as the Midwest’s most profitable land real estate? Only time will tell.
In the south, Texas is struggling to keep up with a new demand for affordable housing. However, the new affordable houses that are available on the market are selling at lightning speed, which could be good news for the future. “The Northeast Texas housing stepped back because of the supply constraints for homes under $300,000, however, the new homes have continued to catch up on demand. Express homes are being constructed and sold in our area. The resale of homes and supply of listings fell, but the average home sold in less than a month,” said Wendy Johnson, ALC, with United Country Real Estate-Texas Landmark Properties, from Royse City, Texas.
Johnson has also noticed a conflict of interest between buyers and sellers. “Owners are selling off tracts or all of their land to developers, and to buyers wanting smaller tracts of land. However, buyers are looking for land to build their homes on that provide ponds, trees, etc., which is a challenge. The rising land cost in many areas has significantly increased, for example, in McKinney, Anna, Caddo Mills, Royse City, Rockwall, Blue Ridge, Farmersville, and surrounding areas.” According to the latest RLI + NAR Land Markets Survey, residential transactions are expected to go up four percent in 2018, with recreational and commercial closely behind at three percent.
Despite Hurricane Irma’s devastating effects on the state, Florida’s land industry is flourishing. “In Florida, the recession is a distant memory.” Says Caleb McDow, ALC, who serves as a Vice President for Crosby & Associates, Inc., from Winter Haven, Florida. “Land is in high demand for both commercial and residential development. Demand is also high for agricultural land. We consistently have more buyers than sellers, which is resulting in higher land prices and lower returns for agricultural investors.”
Despite the Southwest facing some of the worst of the natural disasters of the last few years, including devastating wildfires, irrigated land values and the housing market are holding their own. “The Southwest’s land market is experiencing a few different markets in and among itself right now,” says Justin Osborn, ALC, who is a Licensed Associate Real Estate Broker for The Wells Group Durango, from Durango, Colorado. “Due to the arid climate, irrigated land continues to be in high demand, especially if it’s turnkey and income producing farm ground. The strong housing market has greatly affected development parcels near city limits and caused those to also be in high demand the past eighteen months. Recreational properties still take some time to move, but those that have live water and border public land will obviously sell faster than those that don’t. The market for large acreage dry land parcels continues to still be quite stagnant.”
Even in states whose land industry was rattled in 2017, there is still a lot of good news that can be taken into 2018. Overall agricultural land value has increased, land sale volumes are rising at a healthy rate, and an overturn of the controversial Waters of United States (WOTUS) rule is expected. No matter where you are from across this great country, 2018 is shaping up to be a great year!
About the author: Laura Barker is Marketing Assistant for the REALTORS® Land Institute. She graduated from Clark University in May 2017 and had been with RLI since October 2017.