In these turbulent economic times, many of us are wondering what our property is worth or is it saleable at all. As my partner, Ned Massie, has often said – “If you offer it for a dollar, someone will buy it; but if you offer it for $5 million there may not be many buyers depending on what the property is.” Obviously, the value will probably be somewhere in between.
The present market is totally different from the market we became accustomed to during the period from 2000-2006 when values in many cases doubled and sometimes even tripled. During that time, there was a lack of supply of land and a very high demand and money was easy to come by. This drove prices up at a very rapid pace. Many people wanted to be a part of that action and became landowners and did well. Many of us “old timers” who have been through several ups and downs in the real estate market had a sense that sooner or later the cycle would end. It definitely did end and the paradigms have changed. Each downturn has had different characteristics and this one is no exception.
In today’s market, borrowed money is very hard to come by. Since the near collapse of our banking system, financial institutions are very reluctant to loan money for real estate, particularly land. Money for development is almost non-existent. The back-log of building lots appears to be an increase in the sale of new homes in certain market segments which may take up some of the inventory and create some future demand for development land. Our land database indicates that the market has reached the bottom and leveled off. With the stricter lending requirements the development market will be slow to make any significant increases.
In this slow economy and increased land inventory, it is definitely a buyers market and “cash is king”. Buyers are looking for good value in the properties that they buy and are looking for a future return which may be slow to come whether it be esthetic return, a return on timber or future development return. These are all factored into their offering price. Most do not wait long for a decision from the seller but move on to one of many other properties that are available. The properties that are getting the most attention are the ones with unique features or some “magic”. The “right price” can always be “magic” for properties that have unique attributes as well as those that lack those unique features.
To answer the question – Is my property saleable? Yes it is, but keep in mind that there is much more competition in the marketplace than we have been used to in a number of years. You have to be competitive to be in the game. Keep in mind also that your land investments probably have not taken as big a hit as your stock portfolio; however, there are some exceptions to that. The type of land you own will determine the impact that this recession may have had on your values. Development and transitional land appear to have taken the biggest hit. Rural farms and timberland have been impacted less as a whole, even though there has been some decline in those values as well. Land is still one of the most stable assets.
If you need help determining what you should do with your land asset, call us at Grant Massie Land Company. We know land. Land is our specialty.