The Lay of the Land

The Lay of the Land

Search for real estate on the internet and your first results are likely to be residential properties – new or existing homes listed by local REALTORS®. But land is an equally important real estate product and, ultimately, is the basis for residential, commercial and industrial development. The 2021 Land Market Report, based on a survey by the REALTORS® Land Institute (RLI) and the National Association of REALTORS® (NAR), found land sales in the U.S. rose by six percent in 2021 and prices rose nearly seven percent representing the best year for land sales in nearly a decade. 

Land sales is defined by the RLI as a land transaction where the value of the land is at least 51 percent of the value of the transaction. Land sales generally are divided into categories including residential, industrial, recreational, office/retail, agricultural, ranch and timber. For the survey, states are divided into 10 geographical regions. Alabama falls into Region 9 along with Arkansas, Kentucky, Louisiana, Mississippi, and Tennessee. Texas had the largest land sales at 15 percent. Alabama’s neighbors, Florida and Georgia, showed strong shares of land sales at 13 percent for Florida and five percent for Georgia. Alabama’s share was 2.3 percent.

The survey found residential, industrial and recreational land markets were the most active. Residential land sales, according to the report, accounted for 59 percent of all 2021 land sales. In Alabama’s Region 9, residential land sales were 63 percent and residential land market prices were among the nation’s lowest at $15,000 per acre. Recreational land sale prices increased nationwide by 8 percent in 2021. Recreational land, which includes lake and hunting properties, become more desirable as internet and cell phone service providers expand their range into rural areas.

Residential land was most expensive in the northeast and southeast regions of the U.S, with an average sales price of $250,000 per acre. The south’s residential land was least expensive at an average cost of $15,000 per acre. 

Another recent survey by the Texas Real Estate Research Center, using data reported by land market professionals in Alabama, found rural land prices increased in 2021 by 10.6 percent to $1,961 per acre. For the first quarter of 2022, prices increased 8.5 percent to $1,976 per acre.

The value of cropland and pastureland in Alabama rose steadily in value from 2017 to 2021, according to the United States Department of Agriculture’s Land Values 2021 Summary. Cropland value increased from $3,170 to $3,500 per acre, and pastureland increased from $2,360 to $2,650 per acre over the five-year period.

Auburn University’s College of Agriculture reports that 70 percent, or 22.9 million acres, of Alabama’s 32,480,000 total acres is timberland – the third highest amount in the U.S. behind only Oregon and Georgia.  “Thirteen of the largest private owners of timberland in Alabama are either Real Estate Investment Trusts (REITs) or Timber Investment Management Organizations (TIMOs) and collectively they control 2.2 million acres, over 11 percent of all timberland in Alabama,” says Auburn Agriculture. 

NAR’s chief economist, Lawrence Yun, expects land sales will continue to be strong especially as demand for agricultural land increases and inventory/supply chain management creates the need for more warehouses.