Reasons to Jump on the Wagon and Buy Land



by Lou Jewell, ALC
National Land Instructor
United Country Real Estate – Land Pro

For over twenty years investing in Land has been the most exciting and profitable investment I and others have made. Supply is fixed with 3.7 million square miles, = 2.3 Billion Acres. Use of acreage can change, but the amount is fixed.

1.9 Billion Acres is lower US, 375 Million acres in Alaska

922 Million Farmland Acres of which:

*Cropland – 406 Million Acres

*Timberland – 75 Million Acres

*Pasture Land – 408 Million Acres

*Conservation – 38 Million Acres

66 Million Acres of Development Urban land (Home of 75% of the population)

73 Million Acres of Rural Residential

640 Million Acres Federally Owned Land

*2012 US Census Data

This is what is available and is a fixed amount.

What drives demand?

Use, Resources, Consumer Confidence, Demographics, Fads, Financing Availability, Interest Rates, Economic Conditions, Export Conditions, Export Markets, Government Policies/Subsidies, and Wages and Employment.

Opposing conditions affect values with consumer confidence in the general economy vs. commodity prices and farm land values.

January 2012 consumer confidence was 37.4 and December 2016 was 113.7 * NBC News. It is higher today.

Why so optimistic? Increased corporate earnings, increased wages, reduced unemployment, stock market rally, increased retail spending, low interest rates, construction/lumber price increases together creates the environment for more demand for land.

What does all this mean for land value trends?

Primary indicators point towards continued real estate success. Interest rates remain historically low. Inventory of existing homes continue to decrease. Construction is on the rise and lumber price futures remain strong.

So what is the elephant in the room?

Despite strong land trends in Metro and Urban areas, farmland values are challenged by currently suppressed global commodity markets. Ag-land represents 54% of total land usage in the US. Agriculture and related industries contribute $985 Billion to UD GDP. Agriculture is the nation’s largest employer, accounting for over 23 Million jobs. And overall contribution of the agriculture sector to GDP is even greater that the stated number due to agricultures reliance on inputs and services, which adds additional value to the economy.

Agriculture Land Values Highlights

US farm real estate values averaged p$3,010 per acre for 2016, down $10 per acre (0.3 percent) from 2015 values. The United States cropland value decreased by $40 per acre (1.0 percent) from the previous year. The United States pasture value remained consistent at $1,330 per acre.

Where do we go from here?

Corn/Wheat/Cotton – Steady growth and flat to slightly increased prices. Soybeans/Cotton – Increased demand and moderately increased prices. Livestock-Steady growth, particularly in poultry and swine.

Head winds for Agriculture

Oversupply in Global Grain Markets, Rising Interest Rates, Strong Dollar and Global Trade Uncertainties.

Tailwinds for Agriculture

Lower Energy Cost, Lower Feed Cost for Livestock Inventory, Long-Run Steady Global Economic Growth and Economic Growth Projected at 4.5% in developing Countries.

Forces Affecting Land Values

Limited amount of quality land for sale. Demand for recreational Land, rural home sites, and land for development.

The Appeal of Ag Real Estate

Safe Haven Asset. Land Offers Roots of Stability in a High Risk World and Concerns about World Finical System.

Land Buyers

Farmers Fewer farmers-bigger farmers. Strong farmers are expansion buyers. Security and controlling density. Investors with Farm Roots, Diversification and Recreational/Space. Finally Institutions.

Opportunities we see on the consumer confidence side of the tug of war:

Continued growth in home construction as the supply of homes remain low. Continued growth in commercial construction and development. Uptick in sales of investment land as consumer discretionary income increases. Potential swings in consumer confidence created by political climate. Potential deregulation of the financial industry could create more assessable credit and Interest rates remain low.

Opportunities we see on the agriculture side of the tug of war:

Average age of farmers will create succession that will put new land on the market. Commodity prices are cyclical, and expectations favor a rebound. Farmland as an investment should continue to provide better than market returns. Consumer confidence and global demand increases need for agriculture goods and Government tax and income subsidies continue to facilitate the need for agriculture.

Credit

April 1, 2017 I attended the Realtors Land Institute Annual Land Conference in Charlotte, NC. One of our many expert Land presenters was Carolina Farm Credit. The information above is the highlights of their PowerPoint presentation. Being a Land Broker for over 20 years, it caught my attention in that I have developed over 60 rural subdivisions and have successfully bought and sold land for myself and others.

Using a 30% return on investment buying in the good old days, I invested in  Land for $1,500 to $2,000 per acre for large tracts then subdividing 10+ acre mini-farms reselling for $3,000 to $4,000 per acre.

Since Land prices had continued increasing up to 2014, I could not find the right Land to continue mostly due to global commodity prices and other factors Land values have decreased. This presentation confirmed the many reason for that decrease and reinforced by desire to BUY LAND NOW.

Conclusion:

Land investment prices are here again.

Lou Jewell ALC
Accredited Land Consultant
National Land Instructor
United Country Real Estate – Land Pro
Pilot Mountain NC

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