Outlook on Land

Outlook on Land

WHAT OUR 2021 SALES TRENDS TELL US ABOUT THIS YEAR'S REAL ESTATE MARKET.

STORY BY BLAKE FARRAR, WHITETAIL PROPERTIES

The rural land market continues to surge, and so far, this is in spite of seemingly low inventory and what's projected for 2022: a series of interest rate hikes.

Reports of impending hikes made the news early last fall, and reports continued throughout the end of last year. Inflation across the economy and a volatile stock market are some key factors for how the land market shapes up in 2022.

Since 2020 and that year's interest rate cuts, there's been nowhere else for rates to go but up. So the outcome we expect now — interest rate hikes — was always inevitable. Even more, we don't expect the rural land market to go stagnant. Instead, we continue to see record-high land values with landowners getting top dollar for land that's being sold. The reality now and as we move ahead into 2022 is clear: There's never been a better opportunity to maximize the return on your property than right now.

2021 Was a Record Year for Rural Land Sales

Recent trends and buyer motives from a previous year often inform what we can expect in the rural land market for the following year. In 2020, Whitetail Properties experienced historical sales growth. That year, we sold 433,000 acres company-wide, which totaled $1.8 billion in sales for the year. On average, 10 properties were sold every day, company-wide.

This all took place despite many economic and social unknowns. The country was shut down due to a global pandemic, and the stock market plummeted. But, ultimately, these factors boosted our marketplace for various reasons. This active 2020 rural land market maintained its momentum into 2021 and carried it through last year.

For 2021, Whitetail Properties sold 670,000 acres companywide, which was over 50 percent more rural acreage than what was sold in 2020. That's $2.9 billion in total sales, a significant jump from the numbers we posted the year before. On average, 13 properties were sold every day, companywide. Our Texas team reported an even more impressive land market, with 2021 ranch sales exceeding the prior year by more than 70 percent in sales volume.

What to Expect for the 2022 Rural Land Market

Currently, land inventory is low. For land sellers, this is the factor that carries the most weight. Sellers are in an enviable position, which should continue throughout the year. Those who purchased land within the last five years to resell it for maximum value should consider selling now. The same goes for those who have owned a property for many years and would consider selling but aren't sure if now is the right time. Everyone's goals, reasons, and motives for selling are their own, but from an overall market and value perspective, there has never been a better time to get the most value for your land than now.

Conversely, what should those interested in buying land in 2022 expect?

Incremental interest rate hikes, inflation, and a fluctuating stock market are a few factorsto consider when looking at the future of the land market this year.

First, as interest rates increase over time, one might expect land prices to stabilize with potentially decreasing demand, but that's only one factor. The inflation we are experiencing virtually in every industry and commodity weighs in on the other end of the scale. It can be projected that land values will stay at the higher end of the market with inflation. Creating an interesting dynamic that could result in land prices sustaining. Essentially these factors could balance each other out as it relates specifically to land, continuing the high buyer demand we are experiencing currently. The other consideration regarding interest rates is the anticipated "hikes" are relative. Meaning we have experienced a couple of years of all-time low-interest rates, so if increases do happen, they would be returning to what was viewed as "normal" or "fair" before the significant drops. Although these incremental interest rate increases may not be enough to slow buyer demand on their own, inflation could certainly have an effect, potentially bringing more inventory to the market.

While this creates a sense of urgency for those looking to sell land, it presents an upside for those looking to buy in 2022. Eventually, we anticipate more inventory becoming available due to these economic factors, creating more buying opportunities.

Secondly, the opportunity to purchase property at lower interest rates remains for the time being. Over the next several months, we're most likely going to experience at least one significant rate hike. Historically, the Federal Reserve favors spreading these hikes out over time. Given the optics of the current economy and volatility of the stock market, we expect that to be the case in 2022. If a buyer's highest priority is taking advantage of lower interest rates and land inventory is not their obstacle, the window is still open. Still, land buyers must act quickly enough to get ahead of the larger rate hikes anticipated throughout this year and likely 2023 as well.

Another factor that has less to do with our current economic environment is the social and cultural impact the pandemic's shutdown imposed on a segment of the U.S. workforce. As many offices sent employees home to work, the shutdown proved that a productive and remote workforce were not mutually exclusive. In fact, productivity actually went up in many scenarios where office workers were forced to quickly set up home offices and perform their duties away from a centralized office space.

Our company has seen how this new mentality and opportunity has impacted the ruralland market and buyer motives. It started in 2020, but the trend continues.

Looking ahead, we expect this year's rural real estate market to continue at a strong pacerewarding both sellers and buyers. Some key factors to keep an eye on as it relates to your personal goals and financial situation are the rate of inflation, interest rates, and stock market volatility. The silver lining is land is and forever will be a limited resource. The rate of appreciation throughout time continues to make it a solid and safe investment. If you're considering selling land in 2022, the current market is honoring maximum value in many cases.

ADDITIONAL RESOURCES

For additional information related to land market trends in Texas, be sure and check out our 2021 Texas Ranch Report by scanning the QR code here. With an established team of agents covering different regions across Texas, we have compiled their boots-on-the-ground land sales data and summarized their observations of the land markets across Texas. We hope the Texas Ranch Report helps educate and inform on land value trends across Texas in a rapidly changing environment.