Halderman Vice President Pat Karst gives an update on the real estate market following the fall quarter.
What did the real estate market look like this fall?
“For the last couple of years, the supply of land on the market was historically low,” Karst said. “This year there’s been an abundant amount of land on the market and the demand outworked the supply which ultimately drove prices higher.”
The market for the residential and recreational sectors also saw increased prices and a limited amount of supply. Karst said this is a direct function of the supply and demand paradigm.
“I’ve worked in this industry for 38 years and I’ve never seen anything like it,” Karst said. “Land values from Halderman sales alone are showing a 40% increase since the first of July.”
What were some of the positives from the quarter?
A lot of producers experienced good yields this year, which were coupled with high grain prices. An increase in income gave them an opportunity to invest in more land.
The last time the economy saw the type of inflation experienced in 2021, it was in the 70s. As many will recall, this led to record-high interest rates.
“We’re at historically low-interest rates, the average is around 4%,” Karst said. “In the 70s, interest rates were in the double digits, roughly three times as high as we have now.”
What were some of the drawbacks of the quarter?
Farmland has always been a good investment against inflation. Not only were farmers in the audience for these farmland auctions, investors looking to diversify their portfolio were also driving up the bids.
“The number one drawback from the quarter was that a lot of farmers were bidding on land, but many of them did not win the bid in the end,” Karst said. “Some landowners who wanted to buy more land certainly had the opportunity to do so but ultimately the prices went too high.”
Some wet weather that made harvest a bit challenging this fall was also a drawback, but Karst said that it gave everyone a topic to discuss at these land auctions.
What can producers expect from the real estate market in the next quarter?
Karst is optimistic that low-interest rates will remain constant for the spring quarter. However, he does expect that land supply might be limited in comparison to the fall.
“I think the demand for land will stay constant as well as interest rates,” Karst said. “I think land values will remain strong and the farms that do sell will bring really good prices.”
Karst’s analysis of the quarter showed that the average producer enjoyed an above-average income. This ultimately contributed to the rising prices in land value. Earning potential for producers in 2022 is on track with 2021 but could change at any moment due to the increased prices for inputs.
If you have any questions on the current real estate market Halderman Can Help. Call your local Halderman Area Representative or me in our main office at 800-424-2324 to talk about your specific needs, your property, and your options.