Sellers Rush Land to the Market, but Will It Last?
Nov 15, 2011
If you think you’re seeing more farms listed for sale than the past few years you’re right. But even in the face of higher inventory, sale prices continue to hold firm — even increase.
Our spot-check with realtors and brokers confirm the number of sales listings and auctions is up compared to recent years. But inventory levels are not necessarily higher than levels seen prior to the credit market freeze/recession of 2008.
"Sales volume is up versus 2009 and very similar to the fall of 2008 and 2010 — probably the highest of the four years. It’s the most volume since 2007," says Howard Halderman, AFM, president Halderman Farm Management Service, Inc., Wabash, Indiana.
"To date the extra supply is being easily consumed by the marketplace," he continues. "Prices are steady to slightly higher. Of course, as the fall proceeds, if there are areas with a number of farms on the market, price may flatten," he adds.
Sales volume is up sharply versus 2010 for Scharder Real Estate and Auction Co., Inc., Columbia City, Indiana. "In my opinion, the numbers reflect the ‘freeze’ that occurred in 2009 when it seemed few people were willing to make any major decisions following the financial melt down during the fall of 2008," says firm president R. D. Schrader.
"Frankly, 2010 was very slow until September when seller confidence began to increase," he continues. "A significant portion of our volume in 2010 was based on sales in September through December. When we have a complete year for 2011, I suspect the percentage increase over 2010 will not be as dramatic as it is right now (volume up 105% in 2011 versus 2010 through August).
"Volumes are without a doubt up, but part of that may be due to ‘catching up’ with the volume that was not there in 2009 and part of 2010 when everyone seemed scared to make a move. Farmland prices are undoubtedly an incentive for owners currently considering selling," he adds.
"Our listings are at about the same level as 2007 and higher than 2008 and 2009," says Dave Klein, AFM, vice president, Soy Capital Ag Services, Bloomington, Illinois. His firm likewise saw a very active fall in 2010 after a slow first three quarters of the year. "Across the state, I would say the supply has to be higher. Several tracts have sold without public notification. Most of the land is getting absorbed," he adds. "We also have more transactions this year to get the same number of acres sold — more ‘farmer-sized’ tracts, which helps the supply/demand equation remain in balance."
"We are seeing increased volume this fall compared to last, although we had strong activity last year ahead of a potential change in capital gains rates," says Lee Vermeer, AFM, ALC, vice president, Farmers National Company, Omaha, Nebraska. He says sales numbers are up 16% compared to 2010, up 30% versus 2009 and about equal to 2008, which was a record year.
"For all the reasons buyers want to own additional farmland, current owners want to hold onto it," he says. The bulk of the sales are to farmers, but "investor interest continues to get stronger, with a number of large players and increased number of individuals, as well," he states.
The current higher volume may not carry into early 2012. "We do seem to have a rush to market and close yet this fall," says Klein. This could signal a retightening of supply in early 2012. "We certainly could see a lower supply in 2012, especially in January/February," says Halderman. "I am a little concerned about what the level of supply will look like in 2012," says Schrader, "but I was also very concerned about the 2011 supply at the end of 2010 and that concern did not turn out to be justified."
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