That’s the conclusion one draws from a recent report titled Alabama Farm Real Estate: A Comparison of Returns and Values Since 1970, which was prepared by John Adrian and Walt Prevatt, professors and extension economists at Auburn University.
Here are the high points:
In 1970, buyers were paying on average $200 per acre for Alabama farmland. In 2007, the average price per acre was $3,100, a 1,450% increase over the period or 40.3% per year. This figure covers a substantial timeframe, but it does offer insight into the underlying market conditions inherent throughout much of the state.
Farming and agriculture have long been key drivers buoying rural land values in Alabama. Numerous additional factors have pushed up demand, including the recent stretch of historically low interest rates and the popularity of 1031 Exchanges. And then there are Alabamans themselves. These people love to hunt. They love to fish. They love to get out on the land and out on the water. Residents of Birmingham, Mobile, Montgomery, and Huntsville are excellent examples of urban dollars propelling the market for rural and recreational land to even higher levels.
This is particularly the case in the area of Northern Alabama around Huntsville and Lake Guntersville where Taylor Hicks bought. In addition to Birmingham, it draws investors, retirees, and vacation-home buyers from a multi-state area a short drive away, including Atlanta, Chattanooga, Nashville, Memphis, and Jackson.
Take a look at a map of the state. The distance from the Gulf Coast to the rolling hills along Alabama’s northern border is well over 300 miles, a key factor for those uninterested in boarding their condos and heading for high ground during hurricane season. “Halfbacks” – Northerners who relocated to Florida but have since grown disenchanted, don’t return all the way home. Instead, they move half the way back. Two of the more popular destinations for this growing breed are the mountainous terrain around Asheville, N.C., and Northern Alabama.
Huntsville is Northern Alabama’s largest city. It has become a haven for outside investment and has a burgeoning federal payroll. The Redstone Arsenal, NASA’s Space Flight Center, and the nation’s second-largest research park have led to an influx of goodpaying jobs that employ a well-educated work force. The region also has one of the highest concentrations of engineers and Ph.Ds in the country.
One topic not discussed in the Auburn report was Alabama’s attractive tax climate. According to the state’s department of revenue, Alabama ranks 48th among all states in per capita taxation, a substantial enticement for retirees and those considering retirement in the near future.
Although Adrian and Prevatt, the authors of the Auburn report, wisely opted not to gaze into the crystal ball and offer their predictions on future trends in land values, a great deal can be discerned by reviewing the annual returns on rural land in Alabama during the three years that preceded the report’s publication: 30 percent in 2005, 15 percent in 2006, and 13 percent in 2007.