It’s no secret the pandemic has changed a lot about the supply chain. That’s right, we need more than toilet paper to recover from this apocalypse. From paper and microchip shortages to the cost of goods increasing 10% all around, the domino effect of this global whirlwind is likely just getting started. And unless you’ve been living under a rock, you know by now that the real estate market is booming. This is a good thing for sellers, not so much for buyers with housing prices reaching unattainable levels. But it’s not just physical structure real estate that’s seen an increase. All across the US, land in general has gone up in value, which means gone up in price. Farming land in general has increased 7% since last year, averaging $3,380 per acre (up $220). So let’s unpack that. Check out LandCentral’s Land Value is Rising: How the Pandemic is Impacting Your Raw Land Investment:
It’s Been Undervalued All Along
The US is notorious for their land values. Where most other countries price raw, untouched land at $25k or more, in many parts of the US, you can still purchase a large, usable plot for under $10k. You know the old saying from Mark Twain “Buy land, they aren’t making it anymore,” well it seems those words ring true now more than ever. From shelter to food, we use land for everything.
Developers and investors know this. That’s why raw land is quickly becoming the go-to investment for it’s affordability and potential. Especially in areas where population and industry are growing.
There’s a Huge Lumber Shortage
Yes, just like paper and microchips, there is also a lumber shortage. Business Insider reports that lumber prices rose more than 250% in the last year, adding $24k to the average home price! This greatly impacts the developers’ contracted to build housing, which drives up the cost of the new homes being built. Rather than raise their pricing, some developers chose to postpone building all together. This led to a lack of “inventory” on the market. You know basic economics of supply and demand, right? If the supply can’t meet the demand, the price goes up.
Some buyers are turning to raw land as an investment during these uncertain times. Since we don’t know when the cost of goods will go down and people are wary of the job market with shutdowns and changing wages, some are recognizing the potential in raw land. It’s low cost to hold year after year and it’s hands off with little maintenance. So sitting on a piece of property without building is just the sound investment people are craving in these uncertain times.
There’s Too Many People
No, the pandemic didn’t sprout new people out of the ground and cause overpopulation. This is a problem that’s been building for a while. Now that millennials are reaching home-buying age, they’re ready to purchase their first home. With mortgage rates at a record low, it’s a great time to get locked in. Unfortunately, that lack of inventory comes into play here too. Meaning too many buyers, and not enough sellers (or builders willing to build affordable housing with the cost of goods at an all time high).
So, many would be “home” buyers are turning to raw land as an investment. They aren’t waiting for a builder to build their dream home, they’re taking their future into their own hands. Since raw land’s value has increased, but it’s still relatively affordable compared to traditional housing, it’s a win-win. Many are even putting temporary housing (trailer/tiny home) on their lots while they wait to build when the costs go down.
Panic Has Made a Prepper of Us All
You don’t have to be a Dooms Day Prepper to recognize that many of us weren’t prepared when this pandemic hit. Those living in a city were even less able to socially distance and take solace in nature. Yes, the pandemic spurred in people a desire to have a space to call their own. Whether it be a rural retreat in the country, or a “get out of dodge” safe haven in the middle of the desert, people are already planning for the next disaster.
Because of this new “panic” for space, the value (and price) of raw land is on the rise. Think of it as a “Just in case” property.
But there’s good news! It’s not too late to claim your own piece of the raw land pie. Yes, prices are rising, but they’re still way more affordable than the housing market. And because new land doesn’t look like it’s on the horizon, investing in raw land today will only appreciate over time.
So there you have it, LandCentral’s Land Value is Rising: How the Pandemic is Impacting Your Raw Land Investment. If you already have raw land in your portfolio, great! If you’re thinking of buying, but not sure where to start, let us help. We’ve been selling it long before the pandemic hit, and we’ll be selling it long after it’s over. Raw land’s kind of our thing.