With the elections, high fuel prices and the housing mess we have experienced, 2008 has been an interesting year for everyone. The media frenzy has also been a drain on consumer confidence. I am optimistic that in 2009 we will see improvement in our economy. There is a huge amount of capital on the sidelines waiting for that spark of good news. There are funds in place with more on the way that should ease the credit crunch and stimulate growth. We are beginning to see activity from buyers looking in our local land market.
There are several factors that will have a positive effect on our economy. Interest rates have dropped to as low as I have ever seen. With prime rate at 3.25%, it will become cheaper to finance or refinance loans and more buyers will qualify for loans. Oil prices have dropped drastically, which will reduce cost of production of many products and reduced cost of gas at the pump. This will certainly stretch everyone’s paycheck. The government has already put huge amounts of capital into our economy and President Elect Obama is planning on another huge incentive package. As soon as these factors begin working, it should stimulate consumer confidence and move our economy in a positive direction.
We still have some serious times ahead but we feel improvement is near. Most of our sources say the first half of 2009 will be slow, but begin to pick up. By mid year this should be evident as long as we have no unforeseen disasters. Funds should be trickling down and credit should begin to ease. They predict the stock market should stabilize and become less volatile. Some say the stock market, once confidence is restored, will increase dramatically to a point. Once at that level, the market will be a more gradual, calculated recovery. A new president, whether you voted for him or not, should settle things down some and bring a new belief and direction. I wish him the best, for he is what we have. He has a huge job ahead.
What does this mean for our local land market? As of now, credit is very tight. We have seen a drop of about 10% in land values but still very little activity. Buyers are looking for owner financing. I believe this is a result of two things. Buyers are preserving cash flow in case they need it. Lending institutions are requiring larger down payments. The days of 100% financing may be over as a result of so many home loans being upside down. This means the loan is higher than the value of the asset. There is money available and we are beginning to see more buyer activity. Land values have dropped some but are holding fairly well.
Now is the time when an experienced land professional can do you the most good. Knowing what is on the market and competing with your property is essential in pricing your land. Understanding what adds value to your land is imperative. What things add character and appeal? What are buyers looking for? Is there timber on your land and how much? What type of marketing and exposure to the market does your land broker have? Can your land broker put the deal together when you do have a qualified buyer? All of these things and more are especially important in the present market.
Our optimism is based on good indicators that a recovery is close. The statistics indicate we are nowhere near depression conditions. Huge amounts of capital are being injected into our economy which should be the stimulus we need to turn consumer confidence. Now is the time to be looking for land and there is nothing wrong with making an offer. Who knows, you may find a deal and worst case is you may get a counter offer. Land is a great investment that has held its value much better than many assets. We are very optimistic, and think now is the time to be looking for your next land investment. Green Hill Land & Timber is here to assist you in your search however we can.