Transitional land market remains active

By Sam Clark

07 /16 /18

 

Blog photo 1Transitional Land Market Remains Active

Sam Clark, Area Rep. Halderman Companies

 

Do you own land in the path of development?  Have you recently sold land for development and need help facilitating a 1031-exchange or finding replacement property?  Did you know that Halderman can help with these types of transitional land transactions?  In fact, the transitional land market in Indiana, particularly in Central Indiana and the doughnut counties around the Indianapolis metro area (Boone, Hamilton, Hancock, Hendricks, Johnson, Madison, Morgan, and Shelby), remains active.  The transitional land market consists of farmland that is in and around the metropolitan and suburban sprawl.  This land is in the path of development, and developers and home builders have been active in gobbling up more of this land each year. 

The demand for this land is a reflection of the positive state of the general economy but also a reflection of the current housing market.  Data complied by the Indiana Association of Realtors (see graph below) shows that home prices are rising (blue line) in large part due to the supply of homes for sale that continues to decline (red line).  In 2017, Indiana’s average monthly inventory of existing homes was just under 28,000.  This figure was down 14% compared with 2016 and down 60% from the high mark in 2007. 

 Blog chart

 

The falling supply of existing homes is of particular interest when looking at new construction homes and the transitional land market.  Developers and builders have been working to keep pace with the demand for new construction homes that has been spurred on by the falling inventory of existing homes for sale.  New home construction is on the rise, with building permits in Indiana up 16% (U.S. average was 6.2%) for 2017 versus 2016.  The total number of permits for new construction is still much lower than in years past.  From 1988 to 2005, the data shows that there were roughly 2 existing homes sold for every 1 new construction home.  This spread is now 6 to 1.  When you combine this with recent and expected continued population growth (especially in the younger demographic), there is certainly room for continued growth in new construction homes and subsequently growth in the transitional farmland market.  We expect the transitional farmland market to remain strong in the coming years, and this strong demand means now may be a good time to sell for these farm owners.