Selling recreational land, farms, ranches, and large-acreage estate property hasn’t been easy these last few months. Impacts from the novel coronavirus 2019 and its associated respiratory infection, COVID-19, has taken a toll on land developers, builders, and buyers alike. Fortunately, the news isn’t all doom and gloom. In fact, economists and real estate experts say investors may find more opportunity in 2020 than originally expected.
Vacant Land Market Remains Strong
Before coronavirus took hold in the US, buyer interest in large tracts of land, particularly recreational land, was gaining a lot of momentum. As the virus’s threat grew and governments implemented changes to businesses throughout the country, interest from potential land buyers remained steady. This tells us two things:
- The market for land was strong enough to withstand a global pandemic and economic disruption, and
- It’s poised to become even stronger once the pandemic subsides.
Outlook for the Remainder of 2020
A recent article from Forbes discussed two different possibilities for how the market could look as we finish off 2020. The optimistic scenario sees the market for real estate as a whole making a V or U shaped path, with a sharp decline followed closely by an equally strong upswing. This scenario says that any period of significant distress won’t stick around long enough to impact the longterm health of the market.
Alternatively, the more cautious scenario includes the possibility that the coronavirus may resurge in the fall. If that is the case, the need for social distancing and possibly prolonged business shutdowns would return off and on for the next several months, maybe lasting well into 2021. This has the potential to adversely affect nearly all real estate sectors, but land development will certainly feel the effects as building supply chains could continue to be disrupted, closings could be delayed and financing may be harder to secure.
Getting a Loan for Land Purchases
According to Forbes, another challenge the market has faced recently is the tighter loan restrictions for non-conforming mortgages. Borrowers who are self-employed, investors, or who simply do not have traditional W-2 income may find it more difficult to secure financing, especially if their debt-to-income ratio (DTI) is greater than 43%. Nevertheless, land investors who maintain a long view could have significantly more opportunity to acquire assets at favorable prices, as well as take advantage of some of the lowest mortgage rates in recent history.
The Bottom Line
The key takeaway here is that land for sale remains in demand, though the market is not without challenges. The scope of the coronavirus’s effects will depend on several factors, including the duration of business shutdowns and mortgage lenders’ approach to mitigating risk through lending guidelines.
The bottom line here is this: if you’re an investor, keep the faith and think long-term. Don’t get too hung up on temporary market changes. If you’re a landowner looking to sell, rest assured there are still plenty of interested buyers out there. Invest in some high-quality real estate marketing and work with professionals to ensure your property is being seen by the right buyers.