“Under All Is The Land,” starts the National Association of REALTORS® Code of Ethics. Whether a property is residential, commercial, or of a more rural variety, it all starts from the ground up—literally. With almost all properties needing land on some level, it’s no wonder the demand for residential land real estate continues to grow. As John D. Rockefeller once said “The major fortunes in America have been made in land,” and any land agent would agree that land real estate makes one of the best investments for that reason.
Let’s take a closer look at all the buzz about an increase in demand for residential land real estate. REALTOR® Magazine recently released a piece called “Best Year For New Construction In A Decade?” The article focuses on HousingWire’s prediction that “growing buyer demands will likely spark home builders to construct [more] homes this year than in the last decade.” In addition, the REALTORS® Land Institute released their annual Land Market Survey for 2017 which shows that 25 percent of all closed land transactions over the past year were for residential use. The survey also shows a 5 percent increase in total dollar volume of closed residential land transactions compared to the previous year, meaning the number of residential land transactions are up from the previous year.
Even those in the field are seeing it all firsthand. For example, in the article “The Evolution of Residential Land Sales in the Northeast,” recently published in RLI’s Summer 2017 Terra Firma magazine, expert Accredited Land Consultant Michael Durkin observed “Land prices [in the Northeast] are escalating higher and higher almost to the point of spiraling out of control.” As the demand for land continues to rise, it only makes sense that the prices of land will follow in the affected areas. In fact, RLI’s Land Market Survey showed a 2 percent average increase in residential land prices over the previous year and majority of respondents expect prices to continue increasing over the coming year.
So where are the strongest markets for residential land real estate transactions? The REALTOR® Magazine article points out that “The Midwest and Northeast will likely see the most uptick in new-home construction.” This prediction falls in line with RLI’s Land Market Survey results which show the Northeast leading in residential land sales. Survey participants also expect a three percent increase in residential land sales for the coming year; so, the future is looking bright as well!
All this information may lead one to question, why is there suddenly an increasing number of residential land real estate transactions? Lawrence Yun, the National Association of REALTORS®’ chief economist, explained in the REALTOR® Magazine article that “the increase in new housing would be a much needed relief to the overall housing market” which is currently facing a housing shortage.
Looking at NAR’s “2017 Home Buyer and Seller Generational Trends Report,” Millennials and Gen Yers make up 34 percent of home buyers and are currently driving an increased demand for affordable housing. On the other hand, Baby Boomers are the second largest group of home buyers making up 30 percent of recent buyers. The report also shows that overall 14 percent of buyers opted for a new home versus a previously occupied one, an increase over the previous year adding to the demand for residential land real estate.
In the end one thing is for certain, as the demand for more housing continues to grow, it only follows that the demand for more land will track up with it as will land values.
The annual REALTORS® Land Institute and NAR Research Land Markets Survey is a tool for land real estate professionals, owners, and investors across all sectors of the business to use for bench-marking and as an informational resource when conducting business. Read more on this topic from REALTOR® Mag in their follow-up piece on this post “The Demand for Land Widens.”
About the author: Jessa Friedrich, MBA, is the Marketing Manager for the REALTORS® Land Institute. Jessa has a Bachelor of Science with a dual major in Business Administration and Marketing as well as a Masters of Business Administration in Marketing with a specialization in Social Media. She has been with RLI in the land real estate industry for two and a half years and manages all matters pertaining to marketing and communications for the organization. In her role, she is dedicated to promoting and enhancing the valuable benefits of an RLI membership to the land real estate industry and ensuring RLI continues to be “The Voice of Land.