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COVID-19 Impacts on Rural Residential Hobby Farms

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A panel of Accredited Land Consultants of the REALTORS® Land Institute (RLI) shed light on the impacts of the Coronavirus (COVID-19) outbreak on land values and land market trends across the country in a recent Virtual Round Table session. The panel, which consisted of expert land agents from across the country, mostly pointed towards a positive outlook for the land market despite volatility in other areas. One key market they covered was the rural residential hobby farm market.

With a trend the past decade of urban-dwellers moving further to the outskirts of larger urban areas, the COVID-19 outbreak seems to have pushed the migration to rural residential hobby farms even further. Lisa Johnson, ALC, with Horsepower Real Estate out of Junction City, OR, shared that when it comes to buying a rural residential hobby farm or ranchette, these properties are a great “entry-level for owning land, typically 5-20 acre plots.” She feels that due to the COVID-19 outbreak “People are looking to get back to the basics a bit and out of the suburbs.” She explained these rural residential hobby farms are the perfect alternative because “the price range for these properties is well within reach of someone looking to sell their home in town and roll their equity into a down payment for 5 to 20 acres.”

Rural Residential Hobby Farm

As far as going forward, she says they aren’t seeing a lot of listing coming on but closed sales were still pretty even with where they were this time last year. She did note that since the start of April, many agents are seeing a slight slip in the number of closed sales.  Lisa predicts that there will be a lot of demand and says that right now there isn’t a lot of inventory to meet it. “We’re still seeing a lot of people calling from the larger metro areas… that, whether its 5 acres or 100 acres, they just want somewhere to go.”

She also noted that the shutdown is making it clearer than ever that not everybody needs to go to work in an office. With so many companies getting a taste of working remotely, there will likely be a shift in the future to more remote jobs that will allow people to settle further out from cities on to properties like these. As far as an outlook, she said “I also think the economy is going to come back pretty strong.”

Drew Ary, ALC, with Ary Land Co in Coweta, OK, said he is seeing a similar trend in land sales with “an increase in anything outside of 45 minutes of a major metropolitan area.” He said they’ve “had some seasoned listings that have been on the market a while and many of them have been snatched up lately,” noting them having “a lot of calls on rural residential developments.” Drew mentioned that “these properties on the outskirts of major metropolitan areas really seem to hold their value.” He also noted that the inventory and interest rates are low and thinks “we’ll continue to see an incredible increase in demand for these types of properties.

Panel moderator Eric Zellers, who is also with Ary Land Co., noted that he’s been “getting a lot of calls asking if sellers of larger tracts would consider breaking them down and selling 5 or 10 acres of the property.” It is still early to tell, but this could be a new trend in buyer purchasing as more and more people look to invest in living outside urban areas and instead on a rural residential hobby farm or ranchette.

For more insights on the impacts of the outbreak and shutdown on the ranch land market for ranchers from Clayton as well as insights on how other land markets are being impacted, make sure to watch the full Impacts of COVID-19 on The Land Market Virtual Round Table presented by the RLI 2020 Future Leaders Committee or check out the related posts below:

If you are interested in buying, selling or investing in land real estate, make sure to Find A Land Consultant, like an ALC, in your area with the expertise needed to best assist with your transaction.

Drew AryAbout: Drew Ary, ALC, is an agent with Keller Williams Advantage. Drew has a vast knowledge of raw land, land with improvements, and farm and ranch properties. Above all, he has a passion for selling land and farm and ranch properties by bringing buyers and sellers together through honesty and integrity. Drew spent 10 years in the real estate auction world with roles as a Closing Coordinator, Project Manager, and a large portion as the Director of Farm & Ranch Sales. Drew moved to traditional real estate with Keller Williams Advantage at the beginning of 2017.

Lisa JohnsonAbout: Lisa Johnson, ALC, is the Owner/Principal Broker at Horsepower Real Estate. Specializing in Farms, Ranches, and Equestrian Properties in Western Oregon, her and her team of land Brokers are among the top rural agents in the area. Lisa is a member of the RLI Pacific Northwest Chapter, and a 2019 Future Leaders Committee member.

The Land Market Trends Across America

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Last year was a crazy year for the land industry. An unpredictable market and multiple natural disasters made 2017 hard to follow and made it even harder to predict what would happen next with the land industry.

Even with so many unpredictable factors, The RLI 2017 Land Market Survey, shows that last year was an overall good year for land real estate. In 2017, we had stronger economic growth. After a three-year decline, prices rose for all land types, and timber and greenfield development land are expected to post the strongest growth rates at three percent. Other surveys also prove it was a strong year for land real estate. As shown in the 2017 Land Values Summary, some regions thrived (the Pacific region saw an 8.7 percent increase in average value of real estate) while other struggled (the Northern Plains saw a 1.8 percent decrease). While overall, the value of United States farm real estate is averaged at $3,080 per acre (up 2.3 percent from 2016), some states faced drawbacks because of the natural disasters causing a decrease in hunting land sales. To learn more, we rounded up quotes from top ALCs across America about how their region’s land industry was influenced by 2017.

While U.S. lands typically sold slightly faster in 2017 than in 2016, some states saw a slower sales time frame. However, slower land sales doesn’t necessarily mean a lower need for quality farm land. In Wes Des Moines, Iowa, Sam Kain, ALC, who is the Assistant Vice President and Real Estate / National Sales Manager for Farmers National, noticed a slower time frame in the buying and selling process as a result of clients wanting to get the best possible value for their land. “Buyers of farmland are being more deliberate about their decisions, but farmers and investors are very interested in purchasing the right piece of ground that makes sense for them. Lenders are being more cautious in the amount of money they will lend on a land purchase, but there is still enough capital in the country to create demand for good land,” Kain said in an article published on Farm Forum.

Although sales might take longer than before, the value of the land in Iowa has remained strong. “Values for good land have been fairly steady during the past year and have even seen a slight increase since harvest,” said Kain.

In the Midwest, Aaron Graham, ALC, the President of National Land Realty, from Gretna, Nebraska, noticed a growing concern in the land industry about how the decline in hunting could affect recreational land sales. “Although I have seen reports in our Midwest area stating land values, specifically tillable farm land, have crept up slightly, transaction volume remains a long distance from the market peek in 2014,” said Graham. “There is some increasing concern for the recreational/hunting lands sector from a recent U.S Fish and Wildlife Services report, which states that over the last five years the number of hunters across the U.S. has declined a whopping fifteen percent.”
Not long ago, the Midwest held the most expensive hunting land per acre (averaging about $2,975 per acre, according to a 2015 Whitetail Properties post). Could tillable farm land replace hunting grounds as the Midwest’s most profitable land real estate? Only time will tell.

In the south, Texas is struggling to keep up with a new demand for affordable housing. However, the new affordable houses that are available on the market are selling at lightning speed, which could be good news for the future. “The Northeast Texas housing stepped back because of the supply constraints for homes under $300,000, however, the new homes have continued to catch up on demand. Express homes are being constructed and sold in our area. The resale of homes and supply of listings fell, but the average home sold in less than a month,” said Wendy Johnson, ALC, with United Country Real Estate-Texas Landmark Properties, from Royse City, Texas.

Johnson has also noticed a conflict of interest between buyers and sellers. “Owners are selling off tracts or all of their land to developers, and to buyers wanting smaller tracts of land. However, buyers are looking for land to build their homes on that provide ponds, trees, etc., which is a challenge. The rising land cost in many areas has significantly increased, for example, in McKinney, Anna, Caddo Mills, Royse City, Rockwall, Blue Ridge, Farmersville, and surrounding areas.” According to the latest RLI + NAR Land Markets Survey, residential transactions are expected to go up four percent in 2018, with recreational and commercial closely behind at three percent.

Despite Hurricane Irma’s devastating effects on the state, Florida’s land industry is flourishing. “In Florida, the recession is a distant memory.” Says Caleb McDow, ALC, who serves as a Vice President for Crosby & Associates, Inc., from Winter Haven, Florida. “Land is in high demand for both commercial and residential development. Demand is also high for agricultural land. We consistently have more buyers than sellers, which is resulting in higher land prices and lower returns for agricultural investors.”

Despite the Southwest facing some of the worst of the natural disasters of the last few years, including devastating wildfires, irrigated land values and the housing market are holding their own. “The Southwest’s land market is experiencing a few different markets in and among itself right now,” says Justin Osborn, ALC, who is a Licensed Associate Real Estate Broker for The Wells Group Durango, from Durango, Colorado. “Due to the arid climate, irrigated land continues to be in high demand, especially if it’s turnkey and income producing farm ground. The strong housing market has greatly affected development parcels near city limits and caused those to also be in high demand the past eighteen months. Recreational properties still take some time to move, but those that have live water and border public land will obviously sell faster than those that don’t. The market for large acreage dry land parcels continues to still be quite stagnant.”

Even in states whose land industry was rattled in 2017, there is still a lot of good news that can be taken into 2018. Overall agricultural land value has increased, land sale volumes are rising at a healthy rate, and an overturn of the controversial Waters of United States (WOTUS) rule is expected. No matter where you are from across this great country, 2018 is shaping up to be a great year!

About the author: Laura Barker is Marketing Assistant for the REALTORS® Land Institute. She graduated from Clark University in May 2017 and had been with RLI since October 2017.