What’s Going to Happen to Land Prices in 2023?
by Mason Spurgeon, Certified General Real Estate Appraiser
January 2023
Potential buyers and current owners of farmland are often asking themselves this question: Should I sell or buy now? While I don’t have a crystal ball to predict what’s going to happen, I can look back to the early 2000s for some indication, and also look at the current sales that are taking place.
Recently there was a large tract auction in Carroll County where an investment group came in and purchased all the tracts for a price at the upper end of the market. Much of the farm was low/wet bottom ground; however, it appears that these investors did not care and were looking for safe places to park their money. This is becoming more and more common as it was in 2008. When the stock market starts to look unstable, many savvy investors start looking for better investments. These investments include commodities like gold, silver, and other precious metals, and real estate. But real estate is usually the most desirable investment, for reasons I will explain.
While precious metals appear to do well in down economies, as seen by the huge run up from 2008 to 2011, they do not sustain their high value over a long period of time, and they do not produce yearly income. Also, you must figure out how to store the physical metals to keep them safe from theft, or you buy the paper gold from the stock market which is not tangible and is often manipulated, like many other stocks. By the middle of 2013, the stock market price of gold was down over 30%. To realize the profit from a precious metal, you must sell it at the right time. This is often difficult to know, as the physical price and the stock price of gold are often different.
On the flip side, farmland real estate provides a safer alternative. Overall land prices in Missouri, for example, have been increasing since 1992 with a few years of stabilization or minor retraction, according to the chart from the USDA (see below). Even if the average price goes down, it’s only a minimal amount, and I’m sure it’s within the margin of error. But much of the time the price-per-acre is on the increase.
The other upside to land is the return either from cash rent, hunting leases, or share cropping. Not only can the investor likely see a profit from the sale of the land, they will realize a yearly return/dividend. This is not something that can happen with a precious metal.
If the past is any indication of the future, it is likely that we will continue to see the price of cropland increase throughout 2023, especially if the stock market starts to crash. The price increases will also be compounded by the limited amount of farmland listings on the open market. This does, however, create a market favorable to sellers. If you would like to know what price your farmland is likely to bring you on the open market, email us today, and we will provide you with an opinion of value based on all the latest data and the most thorough research possible.
