Land has outperformed most other types of investments in the United States in the past twenty years. And it looks like this trend is going to continue as the demand for land keeps increasing with the supply being fixed at 3.7 million square miles.
Reasons for Increasing Land Prices
There have been a variety of reasons that helped the land prices steadily increase over the past two decades. They include a strong consumer confidence, healthy economic conditions, optimistic export conditions, favorable government policies and more.
There have been some opposing effects too, though. Currently, the one major factor negatively affecting the demand for land is falling farmland values, which is primarily due to a bearish global commodities market.
The overall consumer confidence, however, remains stronger than it has ever been at 127.4. In January 2012, it was just 37.4.
These figures have been reported by NBC News.
Reasons for Increase in Consumer Confidence
Just like the land prices, there are more than a few reasons for the increasing consumer confidence as well. They range from increased corporate earnings and increased wages to historically low interest rates and a bullish stock market.
Some of the other factors also include a reduction in unemployment, increase in retail spending and lumber prices, and more.
Interpreting These Factors in Terms of Land Value Trends
Most factors reflect an optimistic, positive trend, which means the land prices may keep increasing. Some of the most important factors backing this prediction are incredibly low interest rates and a decrease in the number of homes on sale.
Similarly, lumber prices seem be showing a lot of optimism as well, with construction being on a rise too.
A Quick Look at the Opposing Factor
As we mentioned above, the only negative factor that currently exists is falling farmland values. But we are seeing some positive signs here as well, so it may not be long before farmland values enter an upward trend as well.
After all, the agriculture sector is one of the biggest employers in the country, employing a massive part of the US population with 23 million jobs.
Positive Signs for Farmland Values
Since 2017, farmland values have almost stopped their downward trend. They are now trying to hold ground, while US farm real estate values even showing a slight increase.
Further, lower energy cost and better long-term global economic growth prospects mean that farmland values may start increasing steadily in the near future.
Opportunities Considering the Consumer Confidence
Based on our discussion about consumer confidence, we can continue to see it increasing over the years to come.
While commercial construction is on the rise, the inventory of homes for sale has been steadily decreasing, contributing to an ever-increasing consumer confidence.
Opportunities Considering the Farmland Value Trends
While farmland values aren’t anywhere near as optimistic as other types of land in the US, that might change soon.
This is because not only new land is expected to be put on the market, but the farmland values may start increasing too as the global commodity markets are expected to make a comeback.