During the last ten plus years that I have been receiving the magazine from the National Association of Realtors I do not ever remember an entire article devoted to land and specifically farmland. For the most part rural land such as cropland, hunting land, ranchland or pasture is left out as a category in real estate industry news. So it was a pleasant surprise to open this month’s issue and see the article called Farm Land Rush – Are prices too high? Are there still opportunities to invest? Experts weigh in.
The credit for this article should go to the Realtors Land Institute for promoting land ownership and their organization of real estate land professionals. More networking groups, state chapters and land listing websites are popping up all the time. While most of that may be good there are some rumblings that farmland is headed for a bubble just like every other real estate category did a few years ago. While a general slowdown of values can certainly happen in the foreseeable future most experts agree that a total crash is not expected in land values.
The sheer volume of news articles that have focused on farmland investing in the last year is overwhelming to say the least. After following farmland values for nearly twenty years and only running across farmland investing in the mainstream media maybe only once in a blue moon it is amazing to see Google alerts sending a handful of mentions every day now. The Wall Street Journal, Forbes and nearly every local newspaper in a rural farming epicenter has run articles about farmland prices and values and the topic of investing in farmland. Even Wall Street jumped in and articles about farmland investment funds were reviewed in investor publications.
That is great you are probably thinking. It may be – only time will tell. However, one thing is for certain at least in our area the amount of farmland that is available for sale is probably half of what it was a few years ago. Farmers are holding on to what they have and gobbling up anything they can that is adjoining their property to expand their operations. Many times farmland never sees the open market as neighbors will go to neighbors first or land will be passed from one generation to the next. For the most part the transfer process happens without any potential buyers ever knowing the land changed hands. That makes it rather difficult for the average investor to purchase farmland.
However, one sector that is becoming popular with individual investors is ultra-small tracts that may be in a future development area. These parcels are usually less than 40 acres but are still being actively farmed in crops. The land is usually still zoned agriculture and providing an income but the land is also located in a growing area. Having been involved in these types of sales more over the last few years it has been a beneficial transaction economically to both buyers and sellers. The sellers (usually retiring farmers) need to sell and they can receive a great price for their farmland. The buyers in turn end up with an income producing property that is being taxed as agricultural land not development land and then the buyer also has the potential for more future profits when they eventually sell.
So while farmland investing may be mainstream media now; really, nothing has changed, it is still just farmers making food from the land.