1. Prices of almost all types of rural real estate will rise steadily in the foreseeable future. Rates of appreciation will vary, according to where the property is and what type of property it is. Appreciation rates will beat inflation and have less volatility than stocks. Four or five percent annual appreciation is a reasonable—and modest—forecast.
2. Impacts, both real and imagined, of global warming will encourage relocation from the coasts inland, particularly away from the Southeast U.S. and Gulf Coasts. Upper middle south and mountains will benefit, particularly non-coal-mining areas of Tennessee and Kentucky. Rural areas of colder states will benefit; hotter, drier states will become less attractive.
3. Residential property in rural communities that are losing population will not be good short-term and medium-term investments. Small towns in the mid-West and coal towns in southern West Virginia come to mind. These places can, however, offer good deals on farms and timberland.
4. Above-average appreciation will be seen on rural property around college/university towns. Look for property within a 30-minute drive of second- and third-rank institutions that are increasing their enrollments.
5. Land around inland water east of the Mississippi should be a good, long-term investment. I’m hesitant to endorse acreage on water in the dry areas of the West where chronic drought is going to force reallocation of water resources away from recreation.
6. The cost of constructing houses in the country will continue to be less than in urban areas owing to lower labor costs. But construction costs in both places will continue to rise at a rate higher than overall inflation. A buyer is likely to find a better deal in remodeling an existing house than in starting from scratch.
7. Farmland used for agricultural (as opposed to farmland that is converted to second homes) will appreciate less rapidly than other types of rural property. At some point, farmers cannot make a profit when land is priced beyond what their farming can pay for. More leasing and fewer sales will be seen as that point nears.
8. Hardwood timberland is likely to show above-average appreciation, a trend that’s been evident during the last decade. Hardwood stumpage prices cycle more or less with home construction trends, though the overall trend is up. Hardwood timberland prices have not softened during the lows of the stumpage price cycles. Such timberland can be used for other purposes and has proved to be a sound long-term investment for both individuals and institutions, like endowments and pension funds.
9. Water, as a resource, will take on ever increasing value as heat and aridness move from south to north and expand their influence in the West.
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I just came across this article. I find it helpful while looking for land; but wonder how you feel your predictions have held up since last year. Would you make any changes at this time? Thank you for informative articles.
This is a fair question for anyone who looks into balls of crystal and then reports what he sees.
I don’t survey brokers across the country in any systematic or regular way. So my “data base” is anecdotal and spotty. That said, my impression is that asking prices for most types of land are holding up reasonably well, despite the meltdown in financing and stocks.
A very large tract of SE timberland sold recently for almost $2,000/A, a price reminiscent of 18 months ago. But other tracts are not moving at inflated asking prices. Timberland in the mid-Atlantic and Northeast are not selling at earlier inflated values. A lot of rural land on the market seems to be resistant to price discounting and, for that reason, is not moving at inflated values. Some asking prices should be cut by 50 percent in my opinion based on the intrinsic value of the property. They never deserved to be so high in the first place.
All depressions end. The questions are how soon will this one turn and how far will it come back and how fast. I continue to think that land is the steadiest investment performer, but it has to be bought at the right price. I hope we don’t want to get back to the nutty frenzy of 20 percent appreciation a year, which is the formula for disaster that we swallowed before. Over a five or 10-year horizon, I’ll stick with my call that land will show steady appreciation.
Yrs. Curtis
Thank you 🙂
I own land in western kentucky that I bought in the late 80’s for $285 an acre that I would not trade for the world.I would like to buy more however compared with the rest of the state, there is very little for sale.My land is west of Murray and has no rock in the soil.
It is interesting to look back and read these today.