On the heels of the slight depreciation but overall stability experienced in 2023, many landowners are likely looking ahead to the next twelve months and wondering what may be in store for 2024 land values. During a recent episode of the National Land Podcast, Chief Economist for Farmer Mac, Jackson Takach was interviewed on his thoughts on the market in 2024, the factors driving buyer decisions, and more.

Here’s what to know about land values in 2024!

What Drove Buyer Decisions in 2023?

Activity on both the buyers’ and sellers’ sides stagnated somewhat in 2023, with available listings being down across the board. Rising interest rates also hampered buying power, leading many buyers to hold off on making purchases in the hopes that rates would recede to a more affordable position. Speaking to the factors that influenced this behavior and how it impacted land prices in 2023, Takach stated the following:

“When you see a big change, if you don’t have to sell, you might not sell, right? Or if you don’t have to buy, you might not buy. So I think across the board a lot of people took a look at their finances and their assets, and they said ‘You know what, I’m going to wait and see.’”

“There was a lot of cash out there in the marketplace and people said ‘I’m going to wait this out a bit and see if prices come down.’ What they didn’t fully realize until the end of 2023 was that if nobody’s selling, supply is very low. So what happens when supply goes down, price goes up or holds, right? In a lot of markets, we saw this phenomenon where there wasn’t a lot of land transacted and you might think prices would take a dip, but because not a lot of land transacted, prices held steady. Whatever came up, people were ready to buy and put that cash to work, and since there wasn’t a lot of [available land], it took more money to chase that lower supply.”

Real Estate Cycles

One influencing factor that Takach referenced in terms of land values and availability is the idea of real estate cycles. The United States is currently at the onset of one of the largest wealth transfers in our country’s history, with much of that wealth vested in landholdings. 

When the landowning population begins to pass their assets to inheritors, land availability is likely to see an uptick as these inheritors are faced with the decision to hold or sell the family property. Given that we are at the beginning of this cycle in the United States, it stands to reason that land availability may remain low for a few more years before the cycle swings in full. 

Explaining the ways that real estate cycles can impact land availability, Takach stated, “People tend to move in and out of homes, it used to be an average of 10-15 years, but we’re approaching 5-6 now that people will live in a home and then trade it to move into a bigger home as their family grows. So there are these prevailing cycles, and in land, it’s much, much longer. Because some of these assets are traded generationally, there are parcels that won’t come up for sale unless something dramatic changes in that operation, it might not be available again for 30, 40, or 50 years as that operation moves generationally. So it’s a very different asset compared to almost anything else.”

“There are a lot of aging farmers, and what’s going to happen to that land as it cascades down to the next generation? I think that’s going to be even more of a topic of conversation in the next 3 to 4 years, maybe not this year, but I think we’re a couple innings away from some big changes in generational transition.”

What Are 2024 Land Values Looking Like?

A big part of valuing an asset is evaluating its income-generating potential. It’s a combination of not just supply and demand driving up the absolute price of the land itself, but also the ability of an asset to generate cash flow. 

In a year where the cash-generating power of farmland specifically will be decreased compared to previous years, landowners should expect a relatively stable market more similar to 2019 rather than the periods of rapid appreciation seen in 2021 and 2022.

Takach’s forecast for 2024 land values was as follows: “The outlook for 2024 is definitely more muted than ‘22 or ‘23, it’s hard to beat ‘22. I think farm profits by and large, and again there’s a wide spectrum of profitability out there, but by and large the profit levels on farms in ‘22 were the highest they’ve been in history, right? So the highest net cash farm income in history adjusted for inflation is just an outstanding number, hard to beat. ‘23 was less, but still 25-30% better than average so pretty good. ‘24 looks like we’re right about average. So it’s going to be similar to what we saw in 2019-2020 levels of farm profitability. However, there’s still a great amount of cash coming over from those gogo years in ‘22 and ‘23. I think that’s going to help these farms stay afloat and make decent profits in 2024, but it’s not going to be a repeat, right? This is not going to be nearly as strong as ‘23 or anywhere close to ‘22.”

“What I’ll say is the USDA just put out their February release and they put out good numbers, no shade to cast on the USDA. But every year, whatever they put out in February on average, they revise it up by like 10-15%. So if you do that math, maybe ‘24 isn’t quite as bad as what those early USDA numbers led us to believe.”

Overall, landowners in 2024 should expect a stable market with high demand and low inventory. A reduction in interest rate hikes should encourage more buyers to seriously consider making purchases, though the lack of available properties for sale will continue to fuel competition among willing buyers. This is likely to maintain land values for the most part, despite rising costs and sinking commodity prices. 

If you’d like to learn more about 2024 land values in your area, reach out to your local Land Professional for more information!