Analyzing the Opportunity of Investing in Land in the US

If you search for the best investment options in the US since the past two decades, you’re sure to find land at the top of the list. Yes, land has been and is still believed to be one of the most profitable investments in the United States.

The supply is fixed at 2.3 billion acres, while the use for land in the country is growing significantly every year.

Land Distribution

1.9 billion acres of land forms the lower US, while Alaska accounts for another 375 million acres.

The amount of land under residential use in the rural areas stands at 73 million acres.

As far as the land under development in urban areas is concerned, then it’s a lower than rural residential land at 66 million acres.

A massive 640 million acres of land, however, is under the ownership of the federal government.

The biggest amount of land under a particular type of use is farmland, with the agriculture sector using about 922 million acres of land in the country.

Farmland can be further distributed into the land under use for timber, which is 75 million acres; cropland, which is 406 million acres; pasture land accounts for 408 million acres as well; finally, conservation land is 38 million acres.

 

Factors That Drive Demand

There are many factors that drive the demand for land. These factors typically include the following:

  • Uses of land
  • Demographics
  • Resources
  • Fads
  • Financing availability
  • Interest rates
  • Export conditions
  • Government policies and subsidies
  • Wages and employment

Many of these factors are currently very positive, thus driving more demand for land in the US.

There’s one major opposing factor though, and it’s farmland values.

They have performed very poorly when compared to the prices of other types of land, primarily due to the fact that the global commodity markets, too, have been in a bearish phase.

 

Consumer Confidence and the Reason for the Optimism

Farmland values didn’t manage to make a dent in consumer confidence though. If the numbers released by NBC News are anything to go by, then the consumer confidence has gone up from just 37.4 in 2012 to a staggering 127.4 in January 2018. It’s probably even higher now.

Some of the major reasons for this optimism include the interest rates being at their lowest levels ever, a steady and consistent increase in corporate earnings, reduced unemployment, bullish stock market, rise in construction, higher retail spending numbers, increased lumber prices and more.

 

Is There an Opportunity?

As far as the consumer confidence is concerned, it reflects strong optimism in the land market in the US. It suggests this optimism will continue for a long time to come.

There are more factors to believe this though, such as all-time low interest rates and decreasing inventory of homes on the market.

While the farmland values have been a bit suppressed, they too have seemingly started making a comeback. They showed a slight increase in 2017, and there are some other positive signs as well, such as a possible increase in global commodity prices in the future.

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