The US land market has seen rapid changes over the last few years. With fluctuating land prices, limited land supply, strong housing demand, and evolving market conditions, both homeowners and investors have a lot to consider regarding land investment opportunities.
In this blog, we provide an overview of the latest US land market conditions, analyzing critical metrics like prices per acre across states, supply and demand dynamics impacting real estate, and expert projections on future performance to inform both buyers and investors.
Snapshot of Current US Land Prices
Land prices can vary tremendously state by state, with the average price per acre of land in the US around $17,500. However, prices range from as low as $4,200 per acre in states like Arizona, to exorbitant rates of $350,400 per acre in places like Rhode Island. 1
Key factors impacting land prices include location, land use and zoning regulations, availability of infrastructure and utilities, lot sizes, as well as real estate demand and supply dynamics. Areas with strict development regulations or high living costs generally have limited and more expensive land options.
Ongoing Housing Supply Crunch Impacting Prices
The US has been facing a major housing shortage, with estimates showing a deficit of 5.5 to 6.8 million housing units. This long-term land supply crunch has led to intense competition and rapid price appreciation across land and housing markets over the last few years.3
However, the pace of price growth is expected to moderate as more homes come to market to meet purchase demand and relieve competitive pressures.
Pandemic Boom and Recent Market Cooldown
The US real estate market saw a remarkable boom during 2020-2021 as factors like low mortgage rates, shifting preferences towards larger spaces, and limited supply availability drove intense buyer competition and bidding wars. Land prices rose rapidly amidst unprecedented demand.
But over 2022, the market cooled significantly as interest rates climbed, reducing buyer affordability and urgency while bringing sellers’ high expectations down. Home prices are still expected to increase moderately over 2023-2024 but unlikely to match pandemic gains. 4
Continued Strong Investor Interest Despite Uncertainty
Data shows investor appetite in land and property remains high amidst hopes of securing undervalued investments, especially for assets enabling additional development or expansion. 6
However, both buyers and sellers are cautious proceeding with deals in today's uncertain market, leading to longer closing timeframes for sales and purchases. While demand exists, agreeing on equitable pricing has become a key challenge.
As the market stabilizes over time, investment activity is likely to regain momentum - especially if the current supply-demand imbalance eases. But informed negotiations based on location and asset specifics will remain key.
Key Takeaways for Land Buyers and Investors
For both homeowners and real estate investors, the US land market offers substantial potential for those keeping abreast of the latest developments and trends. As the market regains equilibrium after pandemic swings, buyers should focus on value, long-term potential, and thorough due diligence for success.
