The land market is hot. With few properties available and cash-flush Americans in a buying mood, landowners are cashing in on record-high prices for farmland and recreational properties.
Joe Gizdic has been in the real estate business for 10 years and admits he’s seen nothing like the current land market. “The mortgage market is still strong,” he explains. “And, there's still lack of a lot of inventory. There are plenty of buyers out there who are pretty active, looking for property.”
The Ranch & Farm Auctions Director says he’s been amazed at the amount of money in the marketplace. “People think everybody went broke because of COVID, well, we haven't seen it as a company” Gizdic says. Actually, he is seeing an uptick in the number of people looking for farms and recreational properties. “Tillable acres are always hot. These types of properties rarely come available, and with commodity prices still on a pretty good upward swing, and interest rates really low, it all adds to a hunger for tillable land.”
In March, another real estate company, United Country Real Estate, posted sale results of 242.2 acres that sold in two tracts in Missouri’s Monroe County. The first tract was 122.3 acres and included 103.2 acres of tillable cropland. It sold for $6,000 per acre. The second tract was 119.9 acres with 114.07 acres tillable. It sold for $7,150 per acre. The total farm sale: $1.591 million. To find the greatest values, parcels such as this one need to be divided. This approach allows both the sellers and the buyers to achieve their end goals.
Many recreational buyers are looking for tracts with lakes or hunting ground which also can drive prices higher for surrounding farmland. Gizdic says Ranch & Farm Auctions, is setting records every month. Despite these higher prices, he says it is “always a good time to buy income-producing land.” He points back to the fact that these family farms don’t often become available. “Many of these properties only come up once in a lifetime,” he says.
The buyer landscape shifted because of COVID-19, with many individuals looking for a place to perhaps not make a permanent move but escape the city for a while. COVID-19 made many urban dwellers rethink their living arrangements. Many jobs are now remote. The combination is making small “hobby farms” attractive to consumers who are flush with cash.
Just how long this uptick in land values will last depends on the next 18 months. Gizdic says there will likely be an influx in land inventory coming on the market over the next year and a half. “When these pieces come available, they may drive down the price,” he says. Still, he holds fast to the fact that buying farmland is always a good investment.
EDITOR’S TAKE:
Increasing farmland prices are a double-edge sword for farmers/ranchers. The rising values certainly make their existing land worth more on the balance sheet. Contrarily, if they are looking to expand their operation, rising land prices mean it is more difficult to cash-flow a piece of ground. In addition, they are competing with non-farm buyers who may have fewer restrictions on their ability to pay for a small piece of land. The increased land values could also drive up cash rents for farmers/ranchers. An interesting conundrum for certain. Overall, since many farmers already own a good amount of land, the increased value proposition is probably a good thing. It certainly makes them more credit worthy and able to finance that new truck!
