As farmland real estate values make a notable downward shift, industry experts discuss the underlying causes and potential implications of this cooling trend.
According to Hertz Farm Management’s President of Real Estate Services Doug Hensley, one significant factor contributing to the downturn is the prevailing interest rate environment.
Hensley emphasized, that while current interest rates may not be historically high, rising rates are creating substantial implications for land payments, creating downward pressure on the market. Especially considering the disparity between current interest rates of 7-8% in comparison to the lower rates of 4-5% we enjoyed just two years ago.
Hensley points out that despite ample cash and liquidity in the market, there has been an increase in available selection, leading to more competitive pricing dynamics. Notably, he highlights instances of no sales occurring at auctions across the market, indicating a cautious approach from buyers.
However, amid these cooling trends, Hensley identifies potential areas of strength. In regions where little land has been sold, a reservoir of local capital is poised to compete when quality properties come to market. Conversely, in areas where sales have occurred, the potential for weakness arises due to diminished local capital available for future purchases.
He also anticipates increased competition from alternative sale methods, marking a shift away from traditional public auctions.
