Why Buy Land Now?

This post will conclude our look at first-time, Gen Y home buyers. Now that we’ve discussed the outlook on the housing market landscape for first-time buyers, and discovered where the best housing markets are, we can explore how to get the most bang for the buck, so to speak.

Getting the Most for Your Money
A real estate investor from NJ, who wants to buy land in the hard-hit market of Cape Coral, FL, has found lots for sale on or near the water at about a third to half below their peak prices of two years ago. On a larger scale, Ray Alcorn, an investor in VA, is picking up parcels of land after two years on the sidelines. He has bought more than 100 acres throughout VA this year, much of it at reduced prices.

“It’s just crazy out there right now,” said Mac Boyd, 65, a real estate broker in Arcola, IL, who has sold farms for more than three decades. “The land market has never been stronger.”

Emily Wilson, a realtor in Shelbyville, TN (south of Nashville) was asked to comment on land sales in her area. She stated “acreage is selling better than homes in our area. We sell a lot of horse farms and high dollar properties…but if I were depending on starter home sales for a living, I’d be crying hard times. Instead, our company sales are up $1 million over this same time last year.”

Fort Worth-based D.R. Horton, the nation’s largest home builder by unit volume, is selling off thousands of lots in outlying markets while holding on to land with development potential closer to major metropolitan areas. The parcels closer in are located in markets that are expected to rebound more quickly. The sales figures cited indicate that Horton sold 2,000 lots in Southern California for $7.8 million, a 90+ percent markdown from the estimated $110 million purchase price. In a separate transaction, Horton also sold a 4-acre parcel near San Diego for $4.4 million, a 75 percent markdown from the 2005 purchase price.

Also worth noting in the article is the figure on new-home sales, which are now at a 17-year low.
Land in the Heart of Dixie has been an excellent investment. That’s the conclusion one draws from a recent report titled Alabama Farm Real Estate: A Comparison of Returns and Values Since 1970, which was prepared by John Adrian and Walt Prevatt, professors and extension economists at Auburn University. Here are the high points. In 1970, buyers were paying on average $200 per acre for Alabama farmland. In 2007, the average price per acre was $3,100, a 1,450% increase over the period or 40.3% per year.

This figure covers a substantial timeframe, but it does offer insight into the underlying market conditions inherent throughout much of the state. Farming and agriculture have long been key drivers buoying rural land values in Alabama. Numerous additional factors have pushed up demand, including the recent stretch of historically low interest rates and the popularity of 1031 Exchanges. And then there are Alabamans themselves. These people love to hunt. They love to fish. They love to get out on the land and out on the water. Residents of Birmingham, Mobile, Montgomery, and Huntsville are excellent examples of urban dollars propelling the market for rural and recrea,

tional land to even higher levels.