Rural Land Prices Remain High

Before condos and shopping centers dotted Northwest Arkansas, cattle and pastureland were the area’s most common sights.

In 1997 there were a total of 507,431 acres of crop or pasture land in the two-county area, according to the United States Department of Agriculture’s census.

The USDA’s 2002 census, the most recent available, indicated that crops and pastures occupied only 329,713 acres in Northwest Arkansas, a 35 percent decrease.

Terry Griffin, assistant professor and economist with the University of Arkansas’s Division of Agriculture, said Northwest Arkansas’ land values have been driven-up by basic economic principals, consistent demand from developers and investors and a lack of new supply.

The USDA’s 2007 Land Values and Cash Rents report indicates that the state’s crop and pastureland value has increased more than 57 percent from 2003 and more than 218 percent since values were set in 1987.

“The days of $1,000-an-acre land are long gone,” said Cassie Elliott, managing broker for the Crye-Leike Realtors’ Bentonville office. “Growth and expansion during the last few years has caused land values to shoot up.”

Fred Wanger, commercial real estate agent with Morrison Wanger Properties in Bentonville, said agricultural sales surged in 1999 and 2000. Land prices and transactions dropped after 9/11 but sales picked back up again from 2003 to 2005.

Wanger said prices have remained strong but the number of transactions has declined during the past couple of years as oversupply had decreased demand for new land.

According to the Northwest Arkansas multiple listing service, in 2005 there were 37 farms sold in Benton and Washington counties. In 2006 that number decreased to 18 and in 2007 that number dropped even lower to seven farms sold in the two-county area.

The MLS data is not an exact representation of the number of agricultural tracts sold but it gives an indication of the slowdown in land sales.

“Right now it’s a supply issue,” Wanger said. “There are platted but unoccupied subdivisions, lots within the city that have not been platted and land that has been purchased but not yet developed already in the pipes. Agricultural land is having to essentially stand in line.”

Dave Hodges, real estate agent with Keller Williams Realty of Northwest Arkansas, said that because landowners are not under the same pressure as homeowners or developers to sell their property, they don’t have the same needs to lower list prices.

“A lot of my sellers are just waiting for the development to come to them,” Hodges said. “I have not had a big decline in the number of land listings, just the number of transactions. Most people don’t have to sell so they aren’t in a big hurry to get rid of their property.”

Landowners also know that while the rate of expansion has slowed, developers will continue to push the boundaries of the cities and look for new development sites.

“It only takes one big business or development in an area for the remaining land in the area to become a hot commodity,” Wanger said. “And sellers know that, which is why many are choosing to keep their property on the listing service.”

Thus far, Hodges said, 2008 has proven to be no different.

On March 3 there were 64 farms listed in Benton and Washington counties with an average price of $674,368.

“There are still plenty of land listings and there are plenty of people with money that look at Northwest Arkansas as a great growth area and will come in and make big purchases,” Wanger said. “Outside investors have the ability and means to sit on land and if they know an area is going to grow in the future they are likely to purchase land for later development.”

Elliott said she’s confident people will use the downtime to scout for good deals in the land market.