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A Look Back at the 2023 Land Market


As we enter the New Year, we wanted to take a moment to look back at how the US land markets fared in 2023. AFM Real Estate (AFMRE) specializes in selling land, focusing on timberland, farmland, recreation, and conservation properties. Supported by our forest management consulting business, American Forest Management, AFMRE sells land in 19 states across the country. This broad geography gives us visibility into various local land markets.

In many ways, we were impressed by the durability of land markets in the areas where we operate. This past year brought multiple economic headwinds as inflation remained high, leading the Fed to increase rates four times through mid-year before holding steady for the remainder of 2023. These increases led to higher borrowing costs for all types of real estate. As a result, sales of existing residential homes plummeted from about 6.5MM in January 2022 to 3.8MM in November 2023. The sale of new homes fell from a high of 1MM units per year in mid-2020 to 590,000 in November of 2023. This pullback in new construction and renovations softened forest products markets, which affected timberland owners and investors. The stock market remained cautious for much of the year. Finally, a cloud of recession fear persisted. One would expect these headwinds to have had a substantial adverse effect on land markets, which largely did not prove to be true.

AFM Real Estate finished 2023 with similar results to 2022. While our sale totals were slightly lower than in 2022, Chris Miller, Director of Real Estate Services, attributed the minor decrease to a low inventory of land for sale in the marketplace more so than a reduced demand for land. Demand for acreage properties persisted in all areas where AFMRE/AFM operates. While borrowing costs were high, ample cash buyers absorbed the current market supply. Much of the available cash was from the sale of appreciated real estate, with the sellers then seeking to complete a 1031-like exchange into land. Demand drivers for land that started during the pandemic persisted, with buyers preferring land as a primary investment choice to preserve capital and hedge inflation. The US South was very active, with outsized demand in Texas, Florida, Georgia, Alabama, North and South Carolina, and Tennessee. These geographies continue to experience strong interest and demand for acreage that parallels their population growth. Residents of high-tax states were moving to low-tax states in high numbers as they purchased more land and sought the benefits of rural living. Our Maine and Northern Michigan operations also remained very busy, with buyers wanting to buy land in those states for recreational attributes, quality of life, and conservation values. In addition, our western locations in Washington and Oregon had sustained interest, with buyers seeking timberland investments. Since 2020, we have observed a 30% increase in per acre gross sales prices across all land types in the geographies we operate in, with some local markets experiencing increases of as much as 100%. In most areas, demand for the purchase of acreage persisted despite the challenging economic year.

According to Chris Singleton, Manager of Disposition Services, our large-scale land investment timberland offerings in 2023 had record process participation and excellent results, with sale prices comparing closely with smaller acreage timberland values. Demand for timberland acquisitions continued to exceed supply as investors continued to seek investment-grade timberland for its ability to produce periodic cash flow from the sale of forest products and asset appreciation independent of financial markets. Non-timber income opportunities increased for owners through climate (carbon), higher-use sales, and solar and conservation opportunities. Investors realized that the long-term prospects for forest products are very favorable due partly to an undersupply of available homes and pent-up buyer demand caused by a surge in the prime home-buyer-aged population. Large-scale investment valuation has appreciated considerably, so we anticipate deal flow to continue in 2024 as owners weigh hold/sell decisions.

In many ways, last year was very encouraging. It is becoming evident that a wide audience has realized something that we, in the industry, have known for a long time- land is a unique tangible investment that can preserve and steadily grow wealth, even in challenging times. We look to 2024 confidently, as our land brokers have more buyers than sellers. If you own property and would like to understand your current position and options, one of our expert brokers would be excited to talk with you. Stay tuned for our next 2024 Land Market Outlook.

Best wishes for a healthy and prosperous 2024!