The Rural Real Estate Market Is Primed to Reward Those Looking to Sell Land Now
This spring showed signs that buyers in the market for land are buying it, and those looking to sell land have chosen a good time to list it. As we move into the summer months, there is little to suggest this trend will change.
Several factors are driving a recent surge in land sales, many linked to the country’s economic woes. Which, sure, it’s counter-intuitive. A shrinking economy typically suggests people are sitting on what they’ve got, hunkered down and delaying investment in large purchases. But on March 15, the Federal Reserve cut interest rates to nearly zero. Next, the fallout from an erratic equity market has made non-equity, longterm investments like land an appealing and stable alternative.
“Land buyers have been really active this spring,” said Jeff Evans, national sales manager for Whitetail Properties, the land real estate company that specializes in buying and selling farmland, ranches, hunting and recreational properties. “Economic factors have aligned to create a favorable market for sellers. And, as for the buyers, I think part of what we’re seeing is just this heightened motivation to get outside of the fray, to be outdoors, in open space pursuing activities that are physically rewarding.”
Recent data from Whitetail Properties shows a surge in buyer activity and land sales. Historically low interest rates, among other outside factors, have created a favorable land market for sellers. Photo/Graphics: Whitetail Properties
Increased buyer activity is evidenced by Whitetail Properties sales numbers. In April 2020, sales were up $15 million company-wide compared to April 2019 sales.
“Some of the buyers we’ve seen this spring have long wanted to own a rural property but they haven't pulled the trigger before for a number of reasons,” says Alex Gyllstrom, White Properties’ marketing director. “In most cases it's related to financing, finding the right opportunity or a combination of the two. In the current market though, we are seeing a high-volume of increased buyer activity due to historically low interest rates. These rates have created attractive financing opportunities and an increase in inventory by landowners looking to capitalize on stable land values.”
It’s also true that many investors see land as a safe and stable alternative to volatile equity markets. And it is. As noted in our previous blog post about land and its appeal as an investment vehicle, annual returns on farmland since 1990 (the first year of the index) averaged 11.5 percent. Using this same data set, that’s more than double the average annual return on gold. Returns on farmland even edged out commercial real estate returns by nearly 3 percent.
Whitetail Properties’ year-over-year website data also affirms an upswing in buyer activity. The land company’s overall traffic in May 2020 was up 45 percent compared to traffic recorded in May of the previous year. And online referral traffic was up 67 percent in May 2020 compared to the same month last year. Further, 53 percent of users who recorded time viewing property listings and related content were new to the website. That’s up from 46 percent in 2019.
"I think part of what we’re seeing is just this heightened motivation to get outside of the fray, to be outdoors, in open space pursuing activities that are physically rewarding,” says Jeff Evans, national sales manager for Whitetail Properties. Photo: Whitetail Properties
Whitetail Properties' sharp increase in sales numbers and online activity align with a buying cycle that’s influenced by outside triggers. The typical buying cycle has three stages. First, there’s awareness: a buyer becomes aware of a product and his desire to own it. The second stage is the time spent considering a purchase. And, finally, the third stage: making the purchase. Outside triggers don’t change the buying cycle, but triggers do affect the cycle’s pace. These current triggers, namely the economy and favorable land market, appear to have quickly nudged potential land buyers into actual land buyers.
According to Mansion Global, a Dow Jones & Co. publication that pairs luxury properties with real estate market analysis, the virtues of land and its appeal are particularly strong in periods of economic uncertainty.
“Some people are looking to just have their cash in dirt, if you will, rather than sitting in the markets or in the bank,” Shelly Tretter Lynch, a Compass agent based in Greenwich, Connecticut, told Mansion Global in a recent interview about the state of the urban and suburban real estate markets.
While this year has had its fair share of uncertainty, the fallout from a climate of instability has turned buyers onto land, the age-old investment universally known for its stability. And, at least in part, it’s those emotional triggers — fueled by outside events — that are prompting buyers to act and drive land sales up.
Annual returns on farmland since 1990 (the first year of the index) averaged 11.5 percent. Returns on farmland even edged out commercial real estate returns by nearly 3 percent. Photo: Whitetail Properties
“I think you have a buyer personality type that is very adept at being nimble,” Evans said. “And what I mean by that is, there’s a sensitivity to what’s going on outside of their own lot in life and they’re willing to adjust plans and the timing of certain purchases when outside influencers become favorable. So the buzz on our website, the spike in properties sold, that’s a credit to buyers recognizing that a situation like this doesn’t come along very often. Now, it’s up to those looking to sell land to make their move and test their own nimbleness in response to a rural real estate market that’s rewarding sellers of land.”