Yesterday I was speaking with our office manager about getting some information from one of our files when she enthusiastically told me about some statistical calculations she had been working on – comparing our company’s performance and land market facts from 2004 to present.
She began telling me about how our company, in the first three quarters of 2012, has already sold more acres than in any previous year. While not shocking, this did surprise me just a bit. I would have figured that we sold more in 2006 or 2007…but we are on pace to sell almost 60% more acres than in 2007, which had previously been our best.
Past performance tells us that the last quarter of the year may be 30% of our yearly business, so these numbers may be just a bit higher, but nonetheless we are glad to be moving land. However, if the trend continues through the last quarter of 2012, then our sales, in terms of dollars of real estate sold, will be roughly equal to our 2007 highs.
Now we are talking about a company with thousands and thousands of acres and millions and millions of dollars sold, so these numbers should be relevant to the market, not just statistical anomalies. All of these numbers are great for our company, and surely show positive trends in our market, but there was some not-so-nice news in this bit of information as well. The difference in price per acre from our 2007 highs to our 2012 YTD is a little over 37%. The price of our average acre sold has dropped that much since 2007. There is a large percentage of our 2012 sales that are re-sales of properties we sold in 2006-2008. This means these sellers have taken severe losses.
All of this adds up to something I have been telling everyone who would listen for the past 6 months. 2012 is the best year in land sales since 2007. We’re on track to complete more transactions this year than ever before. More often than not, the motivation behind buyers in today’s market is primarily investment. The majority of our transactions of late have been cash…many times the cash was moved from a stock investment to land. This is the group of buyers that make up the bottom of the market, because they know they have more leverage over the seller.
While the fact that property has lost 1/3 of it’s value, transactions have increased so much, and that those investment dollars are cash and not dependent on mortgage markets points toward stability moving forward. Our sales are occurring at hard, justifiable, and quantifiable numbers. Stability. That’s what the market has been crying out for since before the bubble. It’s here. Risk is minimized. Rational thought prevails. Buyers in today’s market with 10-year investment goals will likely come out very well if the traditional ebb and flow of the real estate market continues. If it doesn’t then it will be because the entire economy is poor, in which case, there could be no better investment than land. Time to buy.
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This is right on target with my personal experience in 2012. I’m having my best year since becoming licensed in 2008.
I would love to hear from other professionals across the country what they are seeing.
Thanks for the update RK.
I specialize in land sales in NC and VA. I just reviewed my company sales results yesterday and they mirror your results exactly. Sales started happening in November 2011 and have been steady since then. My plan was to write a summary of our results, but you just wrote it for me. These identical sales results from two areas so widely separated, add more credibility to your assessment of current market stability.
Edwin E. Orr, ALC, RF, CF
Raleigh, NC
Mr. Orr,
I’m really happy to hear that. Buyers, Sellers, appraisers, lenders, and agents need the stability. They all need to feel like they know what is going on again. There’s opportunities when the market is headed in any direction, but everyone will operate more freely in a stable market. Thanks for your comments.
One concern that I failed to address in the body of the article is the fact that this is a presidential election year. Traditionally, the October prior to a presidential election is slow, as compared to other Octobers.
Oddly enough, while all the hype is on the Romney-Obama race, the outcome in the Senate will probably have a greater effect on our markets…
Same stats in SW Wisconsin. I’m having my best year since entering real estate in 2004. For me it took off about the first of the year and hasn’t slowed down much. Having a mild winter helped here as buyers were able to access the properties all winter. My biggest “challenge” now is that I need more inventory as I’m selling it much faster than I’m replacing it.