We recently administered our annual internal National Land survey to better understand how the factors that impacted National Land Realty Land Professionals and brokers in 2023 as well as gauge their feelings on the land industry in 2024.
The land real estate market in the United States is a wide and varied industry, with many factors impacting different areas at any given time. Despite this, multiple pressures in 2023 held true across the country including low listing inventories and rising interest rates.
Insights from the 2024 National Land Survey
From questions on regional land values to opinions about where the market could go in 2024, the National Land Survey covered a variety of topics. Here are the major takeaways from the 2024 National Land Realty agent and broker survey!
Optimism in the Land Industry
When asked about their optimism for the performance of the land real estate industry over the next 12 to 18 months, 63.8% of respondents selected either “somewhat optimistic” or “very optimistic” as their answer. Also noteworthy is that no respondent chose “very pessimistic” as their answer. This positive outlook is reflective of an industry-wide confidence in the stability of land values across the country and the further potential for growth in 2024.
Motivations for Selling Land in 2023
When it comes to the reasons that landowners decided to sell their land in 2023, two driving factors stood out.
Profit Motive: A majority of respondents, 61.5%, identified profiting from current high farmland values as the primary reason for landowners wanting to sell their land. In 2023, farmland across the country saw record-high values, especially in many midwestern states such as Iowa, Illinois, and Indiana which all saw a roughly 30 to 40% increase in value from 2020 to 2023 according to the USDA.
Lack of Succession: 23% of respondents cited a lack of successors or heirs among the chief reasons that landowners sold their properties in 2023, evidencing the growing issue of generational transition in the agricultural industry.
As the average age of farmers in the United States continues to increase, many farmland owners have begun to divest their farmland holdings in favor of other real estate investments through tools such as 1031 exchanges or Delaware Statutory Trusts. This trend is likely to continue into 2024 as more and more farmland owners become unable or unwilling to work their land.
Methods of Financing Land in 2023
With so many increases to interest rates made over the past year, sales in the traditional real estate market slowed significantly with many buyers being unable to afford heightened monthly payments. While sales and new listings certainly slowed in the land real estate market, interest rates had less impact on the land industry given the cash-based nature of many rural real estate transactions.
This was reflected in the survey results, as 57.5% of respondents noted that the majority of the transactions they oversaw in 2023 were financed via cash. Although the Fed has indicated that further interest rate hikes in 2024 are unlikely, land sales remaining somewhat insulated from the impacts of rate fluctuations should keep values relatively stable throughout the new year.
What’s in Store for the Land Market in 2024?
2023 saw rising interest rates and shrinking buyer pools in addition to low listing inventory, creating a lot of uncertainty in the market. In the wake of a year of interest rate increases, 2024 is anticipated to be a year of market corrections and stabilization.
Many of our agents and brokers do not predict drastic increases or decreases in interest rates or land values in 2024, with 35.85% of respondents predicting no change in appreciation or depreciation of the primary type of land they specialize in. While current interest rates in the United States may seem high in the wake of a period of extremely low rates, we’re currently looking at rates closer to historic normals rather than historic highs.
It will take some time for land prices to adjust to these new normal interest rates, but 2024 is largely expected to be a period of relative stability, barring any kind of major unforeseen economic events like the COVID-19 pandemic. Once interest rates and land values have settled, many buyers may be more likely to pull the trigger on land purchases than they have been this year since they won’t be waiting for prices/rates to change.
For more insights as to what 2024 may hold for landowners, buyers, and sellers, contact your local Land Professional today!