Raw land values in a soft market

Generally speaking does the value of rural, raw land depreciate in unison with a soft residential market?

Would would the end result of the land be? Residential? Farm? Commericial? Industrial?

The end result would be vacation-retirement. Thanks for the reply.

Contrary—undeveloped land often increases in value just by plating/plotting/zoning it…

Such was the case on a A&D loan I just funded in TX—48 acres of raw land originally purchased for 462K is now fetching 30-35K per lot (1/4 acre) and the owner stands to reap a 7 figure payback.


Scott Miller

Scott. Thanks for the info. Maybe my question’s already been answered and I’m just
not reading between the lines but I’m wondering if the value of raw land such as the type that might be used for recreation and hunting leases, etc. tend to move in a parallel direction at the same rate as other RE (urban, suburban, residential). Does it boom as fast during a boom and bust as fast during a bust? Or is it more stable? BTW what does A and D stand for. LMG (let me guess): aquisition and development? Thanks again, Chris

The value of land is directly related to its potential use. If its end use is one which has had a decrease in value, then your appraisal will probably reflect a number that is less than what it would have been appraised at six months ago. But as scott mentioned in his earlier post, the value of any developed, or platted, property would almost certainly be higher than just raw land.

Your intended use may not necessarily be the highest and best use of the land, something each appraisal would normally factor. You can however, have an appraisal done with a particular use in mind, though that appraisal will not really be valid for marketing purposes unless the property is being used as appraised.

Certain markets have been hit harder than others, but land value has not retreated as much. Our company has closed almost $60 million in land deals in the last six months and the hardest hit market we’ve seen has been Las Vegas. We’ve seen land value retreat almost 5% in the urban service boundaries. I would imagine values outside those areas are being affected as well.