Land value considerations
Interest Rates – Higher interest rates are one of the most frequently reported deterrents to land acquisition coupled with low inventory. See our Quarterly Economic Update for a more in-depth analysis.
Residential – The housing market in most areas has cooled, largely due to high interest rates. A cooling market may lead to fewer developments and alleviate upward pressure on agricultural lands, particularly those surrounding population centers; however, that impact has yet to be seen as agricultural lands remain in high demand.
Availability – Inventories of agricultural land are low throughout the region, which continues to bolster values despite elevated interest rates.
Farm Income/Commodity Prices – After reaching record highs in 2022, USDA forecasts farm-sector income will decline by 25.4% in 2023. While this may disincentivize prospective buyers, the correlation between land values and commodity prices in recent years has been weak as many perceive land as a stable, long-term investment. The 2023 outlook for commodities in the Northwest is mixed, but no negative impact on land values has been seen.
Drought – Good snowpack last winter and spring rains brought relief to drought-stricken areas throughout the West. Year-to-date precipitation levels throughout the Northwest range from 77% to 140% (see map below). Storage water and irrigation conditions were generally favorable through the 2023 growing season; however, approximately half of the Northwest territory saw drought conditions in late summer and into fall. There are significantly fewer areas under severe, extreme or exceptional drought than in September 2022 (see maps below).