Common Misconceptions about Land Values

Land values have been all over the place in 2018. Some articles say that land values across America are up. Others say that values are sinking and will continue to do so. It’s no wonder that there is so little agreement on the current state of land values. So far, 2018 has been a whirlwind year with a jumpy stock market, new land and trade laws, and an unpredictable winter that created an uncertain market for land values. While we here at RLI can’t control the weather or the stock market, we can clear up some common misconceptions about land values to help you get a better understanding about land values in 2018.

1: The stock market is the best indicator of what will happen to land values

It used to be a general rule of thumb that land values mirrored the stock market. However, as we’ve seen in 2018, that’s not always the case anymore. There are many factors that impact land values. These include natural disasters, local and national laws, commodity prices, rate of return, and more. While the stock market is still a great way to get a general indication of the economy, it cannot be the sole thing you look to for understanding land values.

2: A higher demand for crops/livestock means higher land prices

Not necessarily. Even when a certain crop or type of land is in high demand, there are many outside factors that can prevent the value of the land from rising. For example, Nebraska has a booming cattle industry and has become a top beef producer for both America and China, but a severe drought has hurt the value of the land. Even though the demand for cattle is strong, the land values have not risen to meet it. Even high quality land can be impacted by forces outside of the land owner’s control. Forest productivity can be hurt by this too. https://www.rliland.com/site-index-measure-forest-productivity

3: Overall drops in land values mean all land values are suffering

While most land markets are interconnected, there are many types of land that can thrive even when others are suffering.  In the 2017 RLI Land Markets Survey the average change in the price of U.S. Land sold for Non-Irrigated Agricultural land was a modest one percent, while the average change in price for Development Greenfield land was an impressive four percent. A decrease in hunting has lowered some recreational land values (although recreational land remains the second most popular type of land sold, but timberland is expected to post strong growth rates at three percent.

4: There is no way to predict if land values will go up or down.

Looking at the state of today’s land values, it’s easy to think that they are unpredictable.

While there is no crystal ball that will predict exact values, there are some overlooked indicators that can give you an insight into which way the market will go. For example, land values will go up if lots of people move to one specific area. The amount of land will stay the same as the population goes up increasing the demand for land. This drives up the desirability and price of the land.

One thing to look out for if you are worried that land values are down is what the areas local land laws look like. Investors and businesses are skittish. They like to research local governments to see if there are any restrictive laws being discussed that could potentially take money away from their business. A lack of interest from outsiders can severely harm the land value of an area. Contact your local lawmakers to let them know the impacts of their laws.

Land values can be tricky. They rely heavily on each other in both bull and bear markets, but can also be independently impacted by dozens of different factors.  They may be hard to track, but understanding the common misconceptions about land values may be able to help you understand the value of your own land a little better. As much speculating as can be done based on the topics mentioned in this article, the best way to learn more about a property and its value would be to Find A Land Consultant. Land transactions require the specialized expertise of an experienced and knowledgeable agent.