What if land values fall? (1 of 2)


We tend to own each parcel of land for just a few months, so there typically isn’t much time for us to benefit from rising values or be hurt by falling values.


Land values for the Texas Gulf Coast region fell by 13.5% following the Great Recession (source), so they can and do fall on rare occasions. But when they do drop, that drop has historically been much smaller than what you see in the housing market. Some of the reasons for that are as follows:


– A change in access to financing or financing terms (think interest rates) doesn’t affect land as much because many more transactions are done with cash or large down payments.


– When demand for rural land softens and prices would otherwise fall, many or most landowners have a high enough net worth to simply wait it out. This is unlike what is generally seen in the housing market.


– The majority of rural land is owned free and clear, and property taxes are generally low due to ag exemptions. As a result, most landowners don’t feel the financial pressure from monthly PITI payments to sell during a period of weak demand.


Leave a Reply