Ask real estate agents in Mississippi if rural land in the state is a bargain, a good investment that is appreciating faster than other classes of real estate, and the answers can be as diverse as the geography of the state. It all depends on what is going on nearby ranging from the draw of Oxford for relocating retirees, the new Toyota site and redevelopment of the Gulf Coast after Katrina.
“Katrina has generated a lot of first-generation millionaires,” said Mark Lewis, broker-owner, Mississippi Land Company, Mayhew, which also has offices in Ridgeland, Natchez and Hattiesburg. “A lot of contractors and other Mississippi businesses have done well as a result of Katrina. The first thing a Mississippian who comes into money does is buy some land. Sales have been very brisk in the southern part of the state. South of Interstate 20 has been doing really well, and there has been some overflow into the northern part of the state, as well. Land is a lot less expensive in the northern part of the state than it is in the southern part of the state.”
Lewis classifies demand for rural land in Mississippi as being good. Hot pockets include development property around Hattiesburg and also areas north of Interstate 10 on the Coast. That relates to a trend for people to relocate farther north to escape the worst damage from hurricanes. He is also seeing demand from people out of Louisiana involved in the oil industry buying properties, particularly in Southwest Mississippi, but also other areas of the state.
“The Mississippi economy seems like it is doing really well,” Lewis said. “The trend appears to be positive. The State of Mississippi still hasn’t caught up with Alabama and Georgia and some of the other surrounding states with regards to land values, and I think we are headed in that direction.”
‘None of us have seen before’
Mark Cumbest, broker-owner of Cumbest Realty Inc., Moss Point, said rural land values in South Mississippi have appreciated drastically.
“The land market was great before Hurricane Katrina, but it is even better now because of the increased demand for land,” Cumbest said. “I started Cumbest Realty in 1975, and what I have been seeing over 32 years is a continual increase in land prices. But what we are all witnessing now is an escalation of values that none of us have seen before. I foresee it continuing to rise at a high rate for the foreseeable future.”
A benchmark evaluation by the Federal Land Bank of a 65-acre parcel of pastureland in rural Stone County was $2,500 per acre in 2003. By 2006, it was valued at $4,400 per acre.
“That is ground zero for rural land values,” Cumbest said. “For something in a commercial zone or R-1, it is going to be a lot higher than that.”
Another example of increasing land values is that the Mississippi Gulf Coast Multiple Listing Service (MLS) had average sales prices for less than 10 acres of $33,846 in 2002. By 2006, the average price had risen to $77,933. Through the first part of 2007, the price had climbed to $96,015.
“That is the average sales price of all listings sold,” Cumbest said. “In Northeast Jackson County, we are seeing land selling for up to $40,000 to $50,000 per acre in areas where there are protective covenants.”
For sales of land greater than 10 acres, the average price has gone from $95,468 in 2002 to $369,877 in 2006, according to the MLS.
Cumbest said customers are approximately half local and half out of state. Many people are looking for a piece of property to build a home for retirement in an area not affected by hurricane storm surges but close to Coast amenities and jobs. Some are buying the land for housing developments, and there are also people buying land for timber investments.
No matter why they are buying, people are looking for continued value appreciation.
“That is happening,” Cumbest said. “I don’t think that trend will stop.”
As the residential population grows in the northern parts of counties on the Coast, commercial development is following.
“We are seeing more and more non-residential land sales taking place to follow the growth where people are living,” Cumbest said. “We are seeing records set in commercial land values, as well.”
Rural land values have also gone up elsewhere in the state.
David Moody, owner of Woodland Services Inc., Philadelphia, said rural land values are very dependent on what is located nearby. Rural land values around Philadelphia have appreciated because of the Mississippi Band of Choctaw Indians’ casino resort and recreational developments.
“When the Silver Star came in over 10 years ago, property values started escalating, a lot of that on speculation,” Moody said. “Still to this day rural land values are much higher than before the resort came in. In surrounding counties away from Jackson, you can find land cheaper than you can in Neshoba County.”
Right now, Moody feels that land being sold for timber investments in the state is overpriced. He feels it isn’t a good investment considering the return from timber.
Recreational land is priced above land that can be used to grow timber and receive a reasonable return.
“But there, someone is placing value other than timber on the property,” Moody said.
Moody said that International Paper (IP) just sold several hundred thousand of acres in Mississippi, and that was bought up by out-of-state institutional investors. IP used to have huge land holdings in the state, but most of their holdings have been sold.
Rural land prices seem to go up and plateau with demand. Moody said when the economy is on the upswing and people have more disposable income, then the market picks up for rural property.
Toyota, Baby Boomers
Rural land anywhere within an hour of Memphis or Tupelo, or within a half hour of Oxford, is in big demand, said Mike Reaves, president and principal broker, Mike Reaves Realty Inc., Potts Camp, which is located between Holly Springs and New Albany. Baby Boomers looking to retire in the Oxford area are fueling the demand there. And prices near the site of the new Toyota site have also appreciated greatly.
“The day that thing was announced everybody quadrupled the cost of their land up and down the corridor,” Reaves said. “It isn’t selling at that price. But it is selling at about double what it was before.”
Reaves says he tells people if you are going to buy land, the time to have done it was yesterday. If one is going to sell land, the time to do it is tomorrow.
“The good Lord is not making more of it,” Reaves said. “We are seeing the first edge of this Baby Boomer retirement trend. Everyone you talk to says, ‘I have one, two, three, four years before I retire. I want to get out of this city and come back home. I just want a few acres.’ We are hard wired to own land. We all want a few acres of land. A lot of ladies want land, too, but men, especially. You have this Baby Boomer demographic glut that is coming. It is supply and demand. There is no more land. There is the same amount of land and more people wanting it.”
Reaves said the cost of purchasing land can vary a lot in the 10 northernmost counties they work in. DeSoto County is $17,000 per acre up to $30,000 per acre. The northern parts of Marshall and Tate County, by contrast, average $5,000 to $9,000 per acre. Benton, Tippah and the northern part of Union County average $1,800 to $2,500 acre. In Lafayette County, it is anywhere from $5,000 per acre to “name your price” if you are close to Oxford.
Tough on ag?
One downside to the trend is the impact on agriculture. Reaves said farmers can’t afford to buy transitional land in demand for recreation and residential development for prices that make sense in the ag economy.
“Cattle people and row crop people in this part of country, unless they have inherited the land, they can’t make it,” he said. “There is no way. They can’t pay the market price for land. They can’t buy it, farm it and come out.”
Houston Wells, Jennifer Wells Real Estate, Benton, said speculation means that a lot of property on the market now is overpriced.
“The land that is on the market right now is priced fairly high, and it is people who are speculating on the property,” Wells said. “They are not really interested in selling it. They are more interested in seeing how high a price they can get for it. It is priced too high for what its actual value is now. There is not as much sales activity now.”
Contact MBJ contributing writer Becky Gillette at firstname.lastname@example.org.