Land sales volume remains high, but slower than pandemic peak

Land sales volume continued to exceed the five-year average of $650 million in gross sales during the first six months of 2023, but gross sales are off from the record-setting pace of 2021 and 2022, according to Farmers National Company mid-year land values report, released Tuesday.

During the first half of 2023, land sales volume came in at roughly $445 million, compared to an average of $735 million in both 2021 and 2022. In addition, land value growth nationwide was negative in Q1 and Q2 2023 when compared to the same time period a year prior.

According to the report, this trend began to emerge during the fourth quarter of 2022 as interest rates increased and inflationary pressures began to weigh more heavily on the overall real estate market.

“These operators have enjoyed a period of high liquidity over the past five years but are now moving into a period of increasing debt service and borrowing. This will most likely result in less available cash reserve to deploy for capital expenditures and land purchases,” Paul Schadegg, the senior vice president of real estate operations for Farmers National Company, said in a statement. “While investors have not always been the successful buyer of properties offered for sale, they certainly are part of the equation, helping set a floor on land values and creating a competitive market. If farm operators step back from aggressive bidding for land, investors will most likely step in to take advantage of purchasing options.”

Despite the slowdown in transaction volume, farm operators remained the largest group of buyers through Farmers National Company, accounting for nearly 80% of the firm’s land sale transactions, according to the report.

“Landowners continue to look for opportunity in the agriculture land market, deciding if this is the best time to sell at historic values or retain ownership of what continues to be a very valuable asset,” Schadegg said.

Schadegg added that there continues to be a strong appetite for land properties from buyers considering farm expansion and investment opportunities in the agricultural economy. He believes that this, combined with strong commodity markets, will continue to drive demand for high-quality cropland, helping to maintain strong land values.

“We remain confident that the strong demand for quality agriculture land will continue through the year,” Schadegg said. “That opinion, coupled with the stable ag economy and a supply/demand scenario favoring the landowner, will maintain the current and long-term value of farmland across the U.S.”

Regionally, the Midwest continued to post positive land value growth. However, it dropped from a range of 18% to 32% in Q3 2022 to a range of 2% to 5% during the first half of 2023.