Corder's Corner

Real Estate Market during an Election Year

We are reminded daily of the potential risk of the now far reaching Corona virus by the prevalent face coverings we witness citizens hiding behind in hopes of remaining safe and healthy. Headlines and radio ads reiterate that we are also nearing an election. The economy pleads for some kind of relief and recovery as many fear losing their jobs or suffering from cutbacks. As November approaches, the country seems to be in a state of anxiety and apprehension wondering what is going to change with policies, taxes, trade, and the economy in general. The economy is indeed burdened with uncertainty. Regardless of the occupying political party in office, the president has the influence to change and direct the economy, real estate markets included. While political parties battle and debate, we are left aiming to predict the outcome of the election and thus the state of the economy as a result. As history suggests, however, it may be easier to predict real estate trends than it is to predict the outcome of the presidential election!

Uncertainty begins with those at the top office, and consequently, trickles down into other areas from there. The 2020 election cycle is ramping up with campaign ads and debates at the forefront. Some presidential candidates are laying out their real estate policies, but it is hard to determine what impact the electoral process will have. Researchers and experts in the industry agree that as we approach November, effects on housing and real estate markets are likely to unfold. In the usual course of events, elections have a way of breeding doubt and ambiguity which then changes the mindsets of home shoppers, sellers, and investors. The amount of sales change and values can be affected. Why is this so? Fear. Fear makes us do wonky things. People also fear change, and when that apprehension creeps in, rational decisions take a back seat. Emotional decisions take the wheel! Consumers are more cautious during an election season as they manage heightened fears of a recession and swaying of politics.

If we investigate history, we see that slowed consumer buying is mostly contained in the month of November. In addition, the year following an election is typically the best of the four-year cycle suggesting that the demand for real estate simply is pushed out to the following year. This depends largely on the economy staying on track. Realistically, the real estate prices in your particular area will not change because of the upcoming election. Those prices continue to be determined by good old supply and demand. If buyers seem to be careful and guarded, it may present you with an opportunity to do the opposite of what everyone else is doing and purchase property or a home. As the renowned investor Warren Buffett said, “Be fearful when others are greedy, and greedy when others are fearful.” The same is true if there seems to be hesitation with listing real estate. Sellers may be delaying which again, gives you an opportunity. Less inventory means more offers and demand for your listing! To add to incentive, mortgage interest rates are at historic lows. With savings such as these, there really is no better time to be purchasing real estate. If you are letting the presidential election influence your real estate investments, try to put it aside. This is the time to be buying real estate, no matter the outcome of the election in November.

The vast state of Montana has an estimated 14.6 million acres of forest land that is owned privately. If you plan to buy land, inquire about timber rights alongside of mineral and water rights. Timber includes all wood growth, standing or down, alive or dead, mature or immature, that is capable of providing raw materials used in manufacturing products that utilize lumber or other forest products. The land that has the timber is evaluated by dividing the net income by the capitalization rate. The net income per acre is determined by using the yearly productivity of the land, the average sales from timber over 10 years, the agricultural income, and the forest and ag production costs.

How would you know if the timber on your land is worth anything? There are five major factors that govern what the timber is worth. First, there is a portion of the worth that is dependent on what the market is doing. Things to consider here would be is the property to be harvested near any mills. Second, what species, size, and quality are the trees that you wish to use? Rare hardwoods are going to be worth more than other woods. Next, how much timber are you considering marketing? It might not be worth it to market a small amount of timber. The larger the sale, the higher the price you may be offered per unit of wood. Remember that the greater the harvest expense is per tree, the less you may profit or that the harvester is willing to pay. There are more variables that needed to be calculated in as well. How close to a road is the timber? Does the site have a steep slope or wet soil? Is there a stream that needs to be crossed and perhaps a temporary bridge built? Lastly, you will want to familiarize yourself with the local timber harvesting and management practices laws because they too can affect the kind of harvesting equipment you are allowed to use and how close to streams you are allowed to be. Sometimes there is a protected species of plant of animal that affects timber harvest.

These components of determining the worth of your timber can cause slight anxiety if you do not know where to start to obtain such information. Take advantage of the free services that the state provides or supplied by the local universities. By visiting the National Association of State Foresters website, you can find contact information for state foresters. You can also contact your local Forestry Extension or county Agricultural Service agent. In some instances, you may feel more comfortable hiring a professional to consult. Forestry consultants provide a wide variety of services such as tree planting advice, forest management, timber cruising (terminology for determining timber value), and timber sale preparation and supervision. Last but not least, you can of course do your own examination of the trends in the market in your state and the surrounding states. If you are looking to purchase or sell land that may have a valuable and marketable amount of timber, contact your local real estate agent for any additional questions you may have!

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