The Race Continues: Economic Growth vs. An Economic Tantrum-Week 19

Land Market Summary by Segment: Retail Land: In the economic history of the world we have never seen a company like Amazon. Its’ tentacles seem to reach everywhere on a global basis. The closest we can come in history is the “company stores” and the vertically integrated companies that existed in the early 1900’s. That concentration of power in one company or a few hands led to the “Trust Busters” populist movement in the late 1800’s and 1900’s. They gave us President Teddy Roosevelt. Economic vitality was enhanced. I don’t know if history will repeat itself. While I can see the benefits to the American consumer of Amazon, I worry about it becoming too great a concentration of power in one company. Monopolies maximize profit via high prices. It is obvious that Amazon is having a huge negative impact on some segments of retail, causing the closing of stores and creating unemployment. That will have an impact on the value of retail land… in some market segments. Currently, we continue to see a demand for individual retail sites in higher income areas, but price sensitivity is occurring. Moderate and lower income areas have almost no demand for sites. In these uncertain times, it is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

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The Race Continues: Economic Growth vs. An Economic Tantrum-Week 18

Land Market Summary By Segment: Soils: All of us have heard that the three most important criteria that determine the value of a tract of land is location, location, and location. We suggest that the fourth item is timing because timing can trump location. But the fifth most important criteria is soils because of the tremendous impact soil type has on the use of land. In Virginia, there are hundreds of soil types. The quality of the soil does impact not only the productivity for agricultural or forestry purposes, it also determines its potential use for residential, commercial, or industrial purposes. For example, for large commercial buildings it is extremely expensive to cut four feet of dirt, put fabric at the bottom of the hole, and then fill in that hole using six-inch lifts that have to be compacted and tested in order to refill that hole to create a sound base on which a large commercial or industrial building could be built. Similarly, poor soils or weak soils can lead to increased cost of construction for a home or roads. If you are looking at a tract of land and evaluating it as to whether you should purchase it, you need to have a discussion about soils. A knowledgeable land consultant should be able to help you determine the soils of a specific tract and their relative quality. In these uncertain times, it is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

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The Race Continues: Economic Growth vs. An Economic Tantrum-Week 17

Land Market Summary by Segment: Nutrient Credits Impact Crop Land: A pressure point on crop land that will drive the creation of crop land and increase the value of existing crop land are the environmental regs such as nutrient credit banks that pay the highest financial incentive to convert crop land into timber land in perpetuity (which is a very long time). It is ironic that the environmental regulations are forcing crop land to be converted into timberland at a time when a growing population is increasing need for food products which is leading the conversion of timberland into crop land. That wheel continues to turn because of government regulation. In these uncertain times, it is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

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The Race Continues: Economic Growth vs. An Economic Tantrum-Week 16

Land Market Summary by Segment: Crop Land: Market prices for cash grain crops (corn, soybeans, wheat) have decreased by approximately 50% from 2014. Hence, farmers’ income has been greatly reduced which has ripple effects into crop land prices. In Virginia, our crop land did not skyrocket in price to the same degree as crop land prices in the Mid-west. Mid-west crop land prices are now in decline as are cash rents in the Mid-west with ripple effects impacting agricultural suppliers including equipment manufacturers, etc. One significant trend that we see in central Virginia is that timber land is being converted into crop land. Often the crops that are going to be grown on this newly created crop land are not the cash grain commodities (corn, soybeans, wheat) but specialty crops. In these uncertain times, it is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

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The Race Continues: Economic Growth vs. An Economic Tantrum-Week 15

Land Market Summary By Segment: Residential Land – Is the Market Building a Bubble #2? There are market segments with an over-abundance of lots and almost no demand for the ones that exist. But in the most desirable and most active market segments, the reverse is true. This type of self-feeding frenzy usually occurs prior to the creation of a “Bubble”. In the most active market segments, lot prices are now reaching “nosebleed” levels, another sign that we see when we are approaching a “Bubble”. The question is how rising interest rates will impact the new home market to get the supply and demand back in some sort of balance. In these uncertain times, it is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

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The Race Continues: Economic Growth vs. An Economic Tantrum-Week 14

Land Market Summary by Segment: Residential Land – Is The Market Building a Bubble? In the land market deal flow that we see, the supply of residential lots in the most active market segments is severely constrained. The forces constraining them include the three years it takes to get a tract of land rezoned and approved for residential development plus another year to actually build the infrastructure. As a result, land developers have to look four years in the future to forecast what they can afford to pay today for a tract of land if they want to create a residential community. Currently, home builders are extremely concerned about lot availability. Therefore they are bulking up their lot purchases. That activity further reduces the supply of available residential lots in the most active market segments. In these uncertain times, it is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

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