Land sales saw their best year in nearly a decade in 2021, according to the 2021 Land Market Report from the Realtors Land Institute (RLI) and the National Association of Realtors (NAR) released on Tuesday.
The RLI defines a and transaction as one in which the value of the land is at least 51% of the value of the transaction
Year over year, land sales rose 6% in 2021, outperforming the pace of acquisitions of other commercial real estate types. In comparison, the dollar sales volume of transactions for commercial real estate properties such as single-family rentals rose 5%, industrial properties rose 4% and apartment buildings rose 2-3% depending on class type.
The states with the largest share of land sales were Texas (15%), Florida (13%), California (6%), Georgia (5%), and Arizona (5%). In total, these states made up nearly half (44%) of all land sales in the U.S. in 2021.
Of all the land markets, those for residential, industrial and recreational land were the hottest, with average sales volume increases of 5%-7% in 2021. Overall, residential land sales accounted for 59% of all land sales and 4% of all residential real estate sales (buyer to build residence on land) throughout the year.
The priciest residential land was unsurprisingly found in the Northeast and Southeast with an average price of $250,000 per acre, while the least expensive residential land was found in the Midwest and South at an average of $15,000 per acre.
According to estimates from NAR based on Federal Reserve Board data on household real estate and the cost of structures, land value accounts for roughly 40% of house hold real estate assets. In addition, as of the fourth quarter of 2021, the underlying value of the land of real estate owned by households totaled $15 trillion, up from $13 trillion a year prior.
Not all land sales had a strong year though. Land sold for strip malls, hotels, Class A offices and malls saw decreases in sale volume during 2021, reflecting changing consumer trends. However, in general, prices for land used for office and retail rose nearly 4%.
Despite this shift, NAR chief economist Lawrence Yun remains optimistic about the land market in 2022.
“Even with rising interest rates, I expect sustained growth in land sales and prices this year, driven particularly by the demand for multifamily and single-family housing needs,” Yun said in a statement. “The shift from just-in-time to just-in-case inventory management amid supply chain issues will continue to drive the demand for land for new warehouses. Moreover, agricultural grain prices will remain elevated due to the war in Ukraine and thereby boost demand for farmland.”