The land market had a great year in 2021, with sales up nearly 6% and outperforming the pace of acquisitions of other commercial real estate types. The 2021 Land Market Survey revealed this good news based on research from the REALTORS® Land Institute and the National Association of REALTORS®.
The annual survey looks at land transactions of members of RLI and NAR. Respondents to the latest survey reported the best land sales performance since the organizations began recording the numbers in 2014. Driving the demand for land were historically low mortgage rates, which drove home sales, the historic net absorption of multifamily and industrial commercial space, and the resiliency of the retail property market.
Other property types saw sales growth in 2021—singlefamily rental sales were up 5%; industrial property sales were up 4%, sales of Class A apartment buildings were up 2%, and sales of Class B/C apartment buildings were up 3%—but none matched the growth of land sales.
RESIDENTIAL, INDUSTRIAL, RECREATIONAL SALES UP 5% TO 7%
Residential, industrial, and recreational were the hottest categories of land sales, with REALTORS® reporting an average sales increase of 5% to 7% in those categories. Land sales for office and retail use also rose about 3% in 2021 after staying flat in 2020. Residential land sales accounted for 59% of all land sales by NAR and RLI members.
Residential land sales accounted for nearly 4% of the combined sales of residential properties (single-family homes, condominiums, manufactured homes, residential land), up from about 3% in 2020, according to NAR’s REALTORS® Confidence Index Survey, a monthly survey of transactions of members engaged in residential real estate.
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 the previous year, according to Federal Reserve Board data. NAR estimates that land is 40% of the total value of household real estate assets after deducting the value of the structure, based on replacement value, from the total value of the real estate assets held.
The states with the largest shares of land sales were:
- Texas (15%)
- Florida (13%)
- California (6%)
- Georgia (5%)
- Arizona (5%)
Together, they garnered 44% of land sales in 2021.
LAND MARKET OUTLOOK FOR 2022
NAR Chief Economist Lawrence Yun noted in the survey report that he expects 2022 to remain a strong year for the land market. “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. The shift from just-in-time to just-in-case inventory management ... 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.”
As for challenges, 50% of respondents said zoning regulations contine to hamper development. With a shortfall of 6.8 million units since 2000, development of residential lots is essential to addressing the housing shortage.