Key Takeaways For National Vacant Land Sales
o Sales prices and transaction volume of national vacant land sales have been steadily rising over the past few years
o Over the last 10 years the national average price for land sales has more than tripled to $350,000 per transaction
o The volume of residential vacant land transactions is higher than all other land asset classes combined
o Over the last 5 years the proportion of vacant land transactions in secondary markets has grown by nearly 60%
National Vacant Land Sales Trends 2019
Vacant land sales in Texas, the Midwest, and Southeast accounted for 80% of the land sales in the U.S. last year, according to the most recent Land Market Survey by the NAR. Overall, the national average sales price for vacant land has increased by about 30% year-over-year.
Sales Price Trends of Vacant Land
o Between 2010 and Q3 2019 the national average for land sales prices has increased by more than 3X, from $100,000 to about $350,000
o Over the past 10 years, average land sales prices in Q4 of each year have trended slightly higher when compared to the rest of the year
o Purchase values range from $75,000 for residential land up to $1 million for agricultural land
Transaction Volumes Rising
o Between 2010 and Q3 2019 the national average annual transaction volume of vacant land sales rose by over 310%
o Since 2010, quarterly transaction volumes for vacant land have been highest the last three quarters of the year
o Median acreage sold slightly decreased to 53 acres per transaction
Why Land Sales Trends Are Important
The only way to accurately determine the true value of an asset is to have reliable data on market and sales trends. By understanding what’s behind the numbers, stakeholders can:
o Understand the behavior of buyers and sellers
o Search for property based on region, budget, and investment strategy
o Improve financial planning by understanding the past, present, and future value of vacant land
Vacant Land Market Trends 2020
The demand for land is affected by annual population growth and the economy as a whole. Over the last generation, annual population growth in the U.S. has slowed by nearly 50%.
However, even with slower growth, the country still requires about one million new housing units each year. Over the past decade, the U.S. has added only around 735,000 new housing units annually, according to Builder and Developer Magazine.
In a recent article for the publication, Greg Vogel, Founder & CEO of Land Advisors Organization, listed some of the top vacant land market trends for 2019 and 2020:
o Vacant land in Class A and B suburban areas is heavily in play for new development
o Finished lots in Class C and D areas are quickly being absorbed and developed
o Horizontal development costs have risen significantly, affecting returns and forcing developers to pay a premium in exchange for a guaranteed finished cost
o Financing is becoming more difficult to obtain, causing fewer lots to be delivered and land prices to rise along with city impact fees
o Future land demand growth will be concentrated in the Southeast, Southwest, and Texas because 70% of the population growth over the next 30 years will be in these U.S. regions
Best Performing Vacant Land Asset Types
Vacant land used for residential and recreational use accounted for more than 50% of the vacant land sales last year, an increase of about 12% year-over-year. Since 2014:
o Residential vacant land transactions increased by 167%
o Industrial vacant land transactions increased by 50%
o Mobile home vacant land transactions increased by 46%
o Commercial vacant land transactions increased by 43%
Vacant land specialists surveyed by the NAR expect the sales prices of all land asset types to continue to increase next year.
Primary vs. Secondary Markets
At the end of last year, Bisnow predicted that one of the top 18 commercial real estate trends of 2019 would be investors flocking to secondary and tertiary real estate markets. Nearly one year later, that’s exactly what has happened with vacant land.
In fact, the proportion of vacant land investment in secondary markets has increased by nearly 60% since 2014:
o 13.2% of all vacant land investment was made in secondary markets back in 2014
o 21% of all vacant land investment has been made in secondary markets through Q3 2019
The NAR reports that U.S. states with some of the greatest number of secondary and tertiary markets have the highest shares of residential land sales:
o Northeast including Vermont, Maine, and New York
o Southwest including Arizona, Nevada, New Mexico, and California
o Southeast including Georgia, North and South Carolina, and Florida
Future Forecast For National Vacant Land Sales
Vacant land is in short supply in many markets across the U.S. At the same time, the housing shortage in the U.S. continues to grow.
Net migration into secondary markets and the demand for housing are creating a direct positive impact on the future sales prices and transaction volumes of vacant land sales.
Formerly under-the-radar secondary markets such as Austin, Colorado Springs, and Fayetteville are seeing increased interest from land investors as residents look for a lower cost of living and a more affordable lifestyle.