How is the Land Market? Is property moving? Are values up or down? Have you sold much? Who is buying? Who is selling? These questions are often asked of me. My response is, during the first 9 months of 2010, the land market was quiet with the last three months finishing strong. At the beginning of 2010, my initial thoughts were that there would be a lot of property sold to take advantage of the 15% capital gains tax rate before the expiration of the Bush Tax Cuts. For the most part, this did not occur. In my opinion, the inactivity was due to the uncertainty of the political climate and as a result, landowners held onto their property as a stable investment. I began to and now see a more positive attitude and atmosphere leading up to and as a result of the November elections. In addition, we continue to enjoy low interest rates and strong commodity prices. These factors contributed to 2010 finishing strong. This is further evidenced by the fact that in 2010 Reck Agri Realty and Auction conducted 19 auctions, sold 13 properties by private treaty, and sold over 36,000 acres for a total sales volume of $24,940,000. Over 80% of this sales volume occurred since October.
2010 and in 2011, the land market will continue to be a sellers market. LANDOWNERS ARE NOT SELLING FOR THE SAME REASON BUYERS ARE WANTING TO BUY, the stability of land as an investment and what alternative is there for a return on your investment with interest rates being so low? Where does the landowner reinvest their money received from the sale of the property? In addition, with higher commodity prices, the seller is reluctant to sell with a higher return. Thus, a limited supply of land on the market to buy. The seller market is also created by strong buyer demand which is again fueled by record low interest rates to borrow, higher commodity prices, and limited land for sale. Currently, a buyer can fix an interest rate between 4 to 6% on a 5 to 30 year loan.
In my opinion, if you are considering selling in the next 5 years, now may be the time. We are currently experiencing record prices with strong buyer demand from both the agricultural owner-operator and investors. This buyer demand can easily change because it is not a matter of if, but when interest rates will increase, combined with the unknown longevity of the higher commodity prices which are easily influenced by weather, political climate, and money markets. There is a fine line between interest rates, commodity prices, and land values. If commodity prices are high combined with low interest rates, land values will increase. If commodity prices are high and interest rates increase, land values may stabilize. If commodity prices decline and interest rates increase, land values will soften. We have no crystal ball as to what is to happen, but the old adage to do the opposite of what everybody else is doing, in my opinion applies today. We are in a unique time period whereby agriculture is the bright spot of the economy and is providing opportunities of which I have never experienced in my career.
If you are a potential seller or buyer of agricultural property in Eastern Colorado, Western Kansas, or Western Nebraska (including the Panhandle), consider RECK AGRI REALTY & AUCTION. What sets us apart from other agricultural real estate and auction companies is our priority is to first help guide, support, and solve the situation you are faced with, before we are paid.
Thank You,
Marc Reck
Reck Agri Realty & Auction
