Understanding Land in the US as an Investment Opportunity
The past two decades have been great for land prices in the US. This is despite that the economic conditions during this period weren’t always stable or favorable for the land market.
With the supply of land being ever-limited at 2.3 billion acres, it’s not surprising that land prices in the US have been consistently going up over a period of time.
Understanding the Demand in Detail
There are more than a few factors that influence the demand for land in the US, but some of the more important ones include financing availability, resources, consumer confidence, economic conditions and more.
Of course, there are opposing factors as well. Currently, the major opposing factor is the falling farmland values, which haven’t been sharing the optimism of commercial land prices at all in the country, primarily due to a weak global commodity market.
Steadily Increasing Consumer Confidence
The farmland values haven’t been able to prevent the consumer confidence from maintaining their upward trend though. If the NBC News report is anything to go by, the consumer confidence that stood at 37.4 in January 2012 has been steadily rising, getting around the 130 mark at the end of 2018.
This optimism has been mainly fueled by factors like impressive corporate earnings, a rise in wages in recent years, a bullish stock market, historically low interest rates, and rising lumber prices, among others.
With consumer confidence not showing any signs of slowing down – coupled with the incredibly low interest rates and the number of homes on sale going down – the upward trend in real estate prices might continue for the foreseeable future.
Addressing Agriculture Land
As we mentioned above, the falling commodity prices have taken a toll on farmland values in the country, which does negatively impact the otherwise extremely optimistic environment.
However, it goes without saying that agriculture is one of the biggest contributors to the US economy, so can never be counted out when it comes to the long-term investment environment in the country.
Furthermore, there have been some positive signs recently. US farmland values and pasture land values have both showed a marginal increase recently, with the cropland values remaining unchanged, which isn’t too bad either.
So Where Are the Opportunities?
As far as the commercial construction and development is concerned, the consumer confidence is as strong as ever, so the opportunities certainly seem to still exist. Both consumer income and investment in land has been on a rise, which further solidifies this opportunity.
Furthermore, there’s also the possibility of a deregulation of the financial industry, which means that the already low interest rates may go down further.
Now, coming to the farmland investment opportunities, they aren’t as bad as they were a few years back. This is primarily due to the fact that the global commodity markets seem to be in a consolidation phase now, and could get into a bullish phase soon.
Similarly, the government seems to be consistently supporting the agriculture industry with tax and income subsidies, which adds to the overall opportunity that exists even more.