What’s the Demand for Land?

By Joanne DiMaggio

Thomas Jefferson wrote: “The small landholders are the most precious part of a State.” The times may have changed, and the definition of a “small landowner” may not be the same as it was in the 18^th century, but the sentiment has stood the test of time. Owning property is still considered a vital piece of the American dream, one that is more attainable today than it has been in nearly ten years.

“We’ve seen land that is selling for a price per acre lower than we’ve seen since all the way back to 2001-2002,” said Steve White with Roy Wheeler Realty Co. and President of Virginia Fine Properties. 

Speaking of current land prices, Don Morse with Homes and Land REALTORS® said, “Believe it or not, some land is still priced in the 2006 range but ‘sold for’ is starkly different. The majority of the land reflects current economic conditions and is priced in the 2003-2004 range.”

Inventory of available land throughout the multi-county area of Central Virginia is plentiful, but Jim Wood, a REALTOR® with Montague Miller & Co. in Lovingston, added that there is “very weak demand for land (building lots or development land) in Nelson.”

“I would say in all counties, land sales have slowed since 2007 due to the current economic conditions,” said White. “We have a lot of inventory, but not a lot of buyers. That’s across all counties. If something is priced properly or a deal, you can sell it. If there’s no motivation for it, buyers aren’t willing to pay premiums for land parcels.”

For those who are buying, Morse says the list of “must haves” as far as amenities are concerned is pretty much the same for all buyers. 

“They want either access to a central water/sewer system (these generally are folks who want a community of 1/3- to 2/3-acre lots) and a neighborhood concept with all the usual amenities; or, they desire acreage parcels, usually 2+ to 5 acres. In this case those that have done their homework want a preapproval for a standard, gravity-fed system (many will settle for a pump system), but no one wants an engineered system unless the cost is discounted from the normal lot price. Paved roads, good well experiences nearby, quality control covenants, and good access to shopping, transportation, etc.”

On this topic, Wood agrees, saying, “Most folks are looking for mountain views, easy access to the property, and utilities.”

White said that a lot of “must haves” in this area “go with the beauty of Albemarle County, mountain views and water. If there’s a specific use for the land, they’d like some of it to be flat rather than it being steep and hilly so they can use the land.”

White added that current inventory of land in Albemarle County includes 656 parcels of land, ranging in price from $25,000 to $6,495,000 for 457 acres. “Some of the land we have is commercial, so this includes farms, big pieces of land as well as lots. We’ve got building lots and large chunks of land that are dividable and can be broken up and developed and are on the conservation easement that we can sell to people who want to keep the natural beauty and not change it.”

Morse added that of the available land, much is “parceled into home sites, i.e. ½- to 10-acre parcels. The large acreage tracts generally are not part of subdivisions unless they are undividable remainder parcels and have only one building site.” 

Wood said in Nelson County there are 175 properties below five acres ($15,000-$425,000) and 116 over five acres ($24,000-$2,250,000). “About 140 lots are in Wintergreen/Stoney Creek. The others are scattered throughout our county with some being in smaller subdivisions.”

Builders Buying Less Land

In the past, area builders and developers would purchase large parcels of land with the intent of creating new subdivisions filled with spec homes that were often purchased as quickly as they were built. Not so any more.

“That segment of the market has come to a screeching halt!“ said Morse. “Many builder/developers are holding more lots than they wish to and are dramatically reducing prices to get them sold.”

White agrees. “A lot of builders who were fueling the land sales by buying a large tract and putting in a subdivision have gone out of business or they have shortened up their inventory and aren’t buying up land parcels. Builders right now are being very conservative. Because of the slowdown in the market, you don’t see a lot of spec homes going up, so they’re not buying as much land as before in order to be ahead of the game.”

Perhaps Jim Wood summed it up best: “I haven't received a call from a developer looking to buy in over two years.”

According to Morse, the economic downturn has impacted the land market “even more so than the residential market.” 

In such a highly charged competitive market, properties that do sell have to have something more to offer. 

“We’re in a market right now that if it’s not a deal or not with natural beauty, it’s very difficult to sell,” said White. “You can sell it, but it has to be priced correctly—that’s for sure.” 

“The demand for land is very slow,” Wood said. “Therefore, owners with nice high quality properties are not selling at this time. Financing is not as easy for land as it was before. This combination gives us a lack of demand and a lack of good quality product.” 

A Good Investment?

For those wondering whether to buy land, “White says, “The downturn in the market will allow for some good opportunities and when the real estate market starts to rise—it goes in cycles—when it picks back up, those people who bought it at a reasonable price will benefit.”

“Land will always be a good investment if one can purchase at or below market value and keep the property for an extended period of time,” added Wood. “The longer the better. Land is not a quick turnaround investment. Our values have not appreciated in the past few years and it is hard to calculate a depreciation percentage. It is different for each type of property.” 

Morse said it is the purchase price that determines whether land is a good investment. “One has no definite idea of when the land market will return to even the pre-2005 prices. The value has been decimated by this downturn and will only gain strength on the heels of the residential recovery.”

Conservation Easements Matter?

Does having land in a conservation easement make it more or less attractive to buyers? Morse believes it can be a plus. “With some conservation-minded buyers they will buy land in conservation easements but they will not get any of the county fees that were paid to the seller of the land. The new owner will benefit by the on-going land use taxation.” 

White feels that question can best be answered more on an individual basis. “There are some people who absolutely love conservation easements and want to be part of it and others who want to develop. If you have someone who wants to develop, you’re not going to show them a conservation easement, although we sold a large tract of land that had a conservation easement but had some development. The buyer broke it up into four pieces so he thinks it’s worth the investment.” 

Questions to Ask

If you want to take advantage of this favorable market for buying a parcel of land, our panel of real estate experts offers this advice.

“The astute buyer will want a power easement in place,” said Morse, “along with any other easements that might restrict usage of the land such as conservation easements that are mandated by the counties, i.e. Green Springs district of Louisa.” He adds that buyers should ask “Is seller financing available? What is the assessed value of the land? Is the land surveyed and are the boundaries well marked? Is there any timber value? And very important, does the parcel have enough road frontage and sight distance for a VDOT entrance approval? Many buyers will be desirous of good watercourse(s) for watering livestock, pond construction, etc.”

Steve White advises: “Make sure there’s a recorded plat on the property so you know what you’re buying, the amount of acreage you’re actually purchasing. Number two is important, and a lot of people don’t think about it but it has ramifications, is to make sure it has an electrical source to it and electricity to the property. If you need an easement to get electricity, it will cost you money. You need to have a soil study done so the land can hold a drain field. There are alternative systems, but they’re expensive. A lot of people who buy land might drill a well prior or make that part of their contract to make sure they have water on the parcel that they’re buying. A $4,000 investment is better than paying for a parcel without water, although it’s a rare occurrence that there is no water.”

Jim Wood summed up his advice as follows: “Once a buyer finds a property they like, they should get comfortable with: boundary lines, zoning, restrictions, access, water, septic, and surrounding owners. Some land is not as developable/valuable as other land because of poor soils, poor or no access, no power, or poor terrain.”

Morse said buyers looking for property in the Charlottesville area should consider access for living needs such as schools, shopping, distance to the workplace, highway access, and most importantly, which area would best serve their lifestyle.

He added that getting a good REALTOR® is key. “A good buyer representative should be prepared to address all of the foregoing issues and be well-schooled in land.

Your REALTOR® should get a sense of your style, size, values, and standards and try to place you in a setting which reflects those values.”

White is in agreement with his colleague’s statement. “Call somebody that truly specializes in the sale of land. There are agents out there like myself that look for land parcels and try to find property throughout the counties. Go to an agent that specializes in country properties and land.”

Wood advises buyers should research as much about the property as possible to uncover anything that could hurt the future value. “Keep in mind that land is a long-term investment.”