At AlaLandCo, we sell land and farms throughout the state of Alabama. There are pockets scattered over the state where the market seems to be doing fairly well. There are still micro-markets where there is a demand for residential land. There is a market for timberland at timberland prices. There is a market for property that is viewed as a good investment over time.
Then there are markets that rely heavily on absentee recreational ownership. Much of the rural property in Alabama is held in this fashion. It’s ownership tends to be upper middle class couples that reside in or very near a major metropolitan area in the state or neighboring states. The people that fit into this class of ownership have experienced the squeeze that the recession has put on all of us. As a result, many have decided that they want cash out their rural property investment. I imagine this holds true for most of the states in the South, and maybe even the entire country. I know about Alabama, so I will stop inferring about the rest of the country now.
The result has been a great many properties coming to the market in the past year. Many of these properties were just purchased by their sellers in the early to mid 2000’s. Here in my home county, Clay County, this trend is very prevalent. Many of these sellers are still reasonably financially secure, but are just reacting to the trends they perceive in the market. Then there are those that walked way out on a limb when they made the original purchase and now find that limb sagging more and more. Due to all of this, there are many, many, properties currently on the market. A few years ago, I told those that were looking for land here that it only changed hands when somebody died (somewhat morbid but it was true). That is no longer the case. Most of the ownership here was once local and therefore there were forces acting in the market that were not economic. These forces kept people from selling Dad’s land or PawPaw’s and MawMaw’s land. Today’s ownership does not have these non-economic ties to the land. Therefore they are much quicker to make a selling decision.
All of this has led to a tremendous downward pressure on prices. It is not reasonable to expect the prices that sellers were asking for in 2007 (some are still on the market at those prices). I often have sellers want to list something with me at an absurdly high price in hopes that a “rich” doctor or lawyer from Atlanta will come along with more money than he has sense and pay two prices. Let’s follow that just a moment. I think most would agree that you must be reasonably intelligent to make it through med school or law school. Why do people think they will automatically go “dumb” when they see the property they have for sale? It makes no sense to me. I have sold properties to both doctors and lawyers and did not perceive any of them to be dumb or making a move that was financially ill-advised. They have achieved their status by making smart, well-informed decisions…not compulsive purchases of high value assets like land.
Yes, this is the group of people that still have disposable income to buy land and farms with today. They are also smart enough to know that with a little research they can find a property that is priced in line with current markets for the area. The doctors and lawyers do not have the market cornered on these smarts either. EVERY buyer in the market today is well aware of this fact. If you want to sell a property it must be priced in line with the market. If you want to look at a for sale sign on your property for the next 5 years, keep looking for that dumb doctor or lawyer.
There IS activity in the market. Properties that are priced right are selling. For much of rural Alabama, that means pricing your rural timberland at rural timberland prices. Not prices that over-value the recreational aspects of the property. Not prices that are looking for a developer to buy your land and turn it into a subdivision. Outside of a very few isolated pockets, there is not any residential development going on. Why would a developer pay big money for your property when he already has three that are not selling? He’s not even looking at your property.
Prices are off throughout the state anywhere from 15% to 50% from the highs in 2006-2007. If you want to sell, you need to get serious about pricing. It is the FIRST thing that a potential buyer considers when he or she sees and advertisement for your property. All of the advertising in the world will not sell $0.50 pencils for $5.00. The same will hold true for your property. Pricing is not the only element in selling, but at least for now, it is the biggest.