Continuing to be a Ray of Sunshine Through this Unusual Year: LAND

COURTESY OF BLAKE FARRAR

The year 2020 will go down in history as one of unrest and struggle for many industries and businesses, large and small alike. The narrative much of the mainstream media has portrayed is one of doom and gloom for Americans; however, the rural land market continues to tell a different story. In an article we submitted in the summer 2020 issue, we discussed the initial indicators we were seeing of rapidly increasing demand in the market and the timely fundamentals of the land investment. In the early stages of the pandemic, the market showed signs that buyers in the market for land are buying it, and those looking to sell land have chosen an excellent time to sell it. As the year rolls on, it’s encouraging to see this trend continue. Just six months later, as the initial dust begins to settle, it’s hard to believe so much has taken place in such a short period.

“Land buyers have been really active this year,” said Jeff Evans, National Sales Manager for Whitetail Properties. “I think part of what we’re seeing is this heightened motivation to get outside of the fray, to be outdoors, in open space pursuing activities that are physically rewarding with family and loved ones. In turn, economic factors have aligned to create a favorable market for sellers as well. It’s created a unique market to really reward both buyers and sellers.”

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. Online referral traffic was up 67 percent in May 2020 compared to the same month last year, and new visitors to the website were up 53 percent. Land.com even reported web traffic up 76 percent year-over-year, with April through August at record levels never seen before.

While web traffic doesn’t always tell the whole story, buyer activity has resulted in similar increases in closed sales nationwide for Whitetail Properties. For example, in April 2020 at the height of the pandemic, sales were up $15 million company-wide compared to April 2019 sales. Additionally, through Q3, our national sales volume has increased over 30 percent year-to-date. Isolating Texas sales, by early September we exceeded the total number of ranches sold from the entire year prior, ultimately forecasting a 40–50 percent total increase over last year.

When you stop and take this in, it’s almost irrational to think that in the middle of a global pandemic, a volatile stock market, depressed oil prices, and a heated election year, that the Texas land market is thriving. What could possibly be fueling this increased demand? Well, these results are actually quite logical.

Throughout the last six months, several obvious factors are driving this surge in land sales, many linked to the country’s economic roller coaster. A shrinking economy typically suggests people sit on what they’ve got, hunkered down, and delay investment in large purchases. By March 15, the Federal Reserve cut interest rates to historic lows. Next, the fallout and then erratic behaviors of the equity markets have made non-equity, long-term investments like land an appealing and stable alternative. “Some of the buyers we’ve seen enter the market have long wanted to own a rural property, but they haven’t pulled the trigger up to this point for a number of reasons,” says Dan Perez, Whitetail Properties’ CEO and Owner. “In most cases, it’s related to financing, finding the right opportunity, or a combination of the two. In the current market though, we see a high-volume of increased buyer activity largely due to historically low-interest rates. These rates have created attractive financing opportunities for buyers. In turn, sellers realize land values are holding very steady and, due to increased demand, are able to capitalize on sustained land prices.”

It’s also true that many investors see land as a safe and stable alternative to volatile equity markets. And it is. Annual returns on farmland since 1990 (the first year of the index) averaged 11.5 percent. Returns on farmland even edged out average commercial real estate returns by nearly three percent.

“While low interest rates and good investment fundamentals are a huge part of the story, there are new chapters in this book being written,” says Joey Bellington, Texas Broker for Whitetail Properties. “We’ve had incredible interest rates for a while now, but due to current outside pandemic events and all that goes with it, there is a material shift in the way buyers are viewing land both as an investment and as a lifestyle.”

There is a material shift in the way buyers are viewing land both as an investment and as a lifestyle

—JOEY BELLINGTON, Texas Broker for Whitetail Properties

Whitetail Properties’ increase in sales numbers and online activity align with a traditional buying cycle that’s influenced by outside “triggers.” The typical buying cycle has three primary stages; first, there’s awareness: a buyer becomes aware of a product and desires to own it. The second stage is the time spent considering a purchase. And, finally, the decision to make the purchase.

Outside triggers don’t change the actual buying cycle, but where it gets interesting is the effect these triggers have had on the cycle’s pace. These current triggers and the timely combination of them have quickly nudged many potential land buyers into active land buyers at a much faster rate. The COVID-19 pandemic, government mandates, the volatility of the equity markets, favorable land values, and historically low interest rates all act as outside triggers that shrink the buying cycle’s timing. The amount of time between buyers’ initial interest in a ranch on the market and making the purchase decision has been compressed. Buyers are entering the land market equipped and ready to make decisions. We are witnessing pent up demand playing out unlike anything we’ve experienced.

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 triggers— fueled by outside events—that are prompting buyers to act and drive land sales up.

“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 ultimately up to those looking to sell land to make their move and test their nimbleness in response to a rural real estate market that’s rewarding sellers of land.”

As the year continues to unfold, both buyers’ and sellers’ trend of enjoying a unique and positive rural land market is expanding across the country. With the lingering pandemic and an emotionally charged presidential election, no one can say with absolute certainty, but as things stand, the opportunities rural land offers may be one of the few rays of sunshine through the cloud that has shadowed this unusual year. °