Is Land in the US Still a Good Investment Option?

The land in the US has been one of the best investments in the US in the past two decades, but is that still the case?

Well, with the fact that the supply would never go beyond 2.3 billion acres but the demand for land steadily increasing, the long-term picture for the land market does seem to be pretty positive.

But there’s obviously a lot more to it, which we will quickly discuss below.

Factors that Determine the Demand

The demand for land in the country – or pretty much any major country for that matter – is influenced by some standard factors. They typically include:

  • Uses for land
  • Resources
  • Financing availability
  • Interest rates
  • Economic conditions
  • Export conditions
  • Demographics
  • Employment
  • Government policies and subsidies

There are some more as well, but these are the most important ones.

That said, the only factor working against the land market currently is the falling commodity markets, which have been negatively affecting the farmland values.

Overall Environment Still Very Optimistic

But as far as the overall environment is concerned, there’s still a lot of optimism. This is clearly reflected in the fact that the consumer confidence has went from just 37.4 in January 2012 to 127.4 in July 2018, which was revealed in a study by NBC News.

This optimism is backed by some strong factors, such as better corporate earnings, increased wages, extremely low interest rates, bullish stock market, rising retail spending and more.

Would the Optimism Continue in the Future?

The all-time low interest rates – coupled with the falling inventory of homes and all the other factors discussed above – indicate that the optimism is here to stay.

The construction industry is still not showing any signs of slowing down, while the lumber prices have been steadily increasing as well.

Future of the Farmland Values

As mentioned above, farmland values haven’t been sharing the same optimism as the rest of the land market. However, given the agriculture industry’s huge contribution to the US economy and representing 54% of all land in the US, it shouldn’t be ruled out either.

This is especially because it’s usually considered pretty reliable investment options in the long-term, and the recent trends for farmland values haven’t been too bad either.

Both the farm land real estate and pasture land values showed a bit of a recovery, while the cropland values managed to hold their ground and arrest their fall.

On to the Opportunities

There seems to be little doubt about the opportunities as far as the more commercial side of things are concerned. The rising consumer confidence, falling interest rates and decreasing inventory of homes on the market, besides the other factors discussed above, mean that there may be good opportunities in the US land market for a long time to come.

And with the farmland values showing some signs of recovery, they aren’t too bad an investment option either. The global demand for agricultural goods is on the rise, and the global commodity markets are expected to make a comeback soon as well.