Rural real estate is uniquely positioned in the wake of what the media calls “the housing market crises.” The trends in rural real estate ownership have their own unique pattern. In the 1990’s, according to a report by the Economic Research Service of the United States Department of Agriculture, rural and small town populations grew as professionals from metropolitan areas chose to abandon urban lifestyles and the problems of traffic, pollution, and crime to embrace the quality of life offered by small town America — friendly neighbors, community activities, clean air, and open space. The trend was facilitated by the age of the world wide web as the internet became established as the central platform of business operations by the mid 1990’s. Many professionals found that the new virtual office allowed them the freedom to conduct their business from any location they chose.
The great American dream to own a piece of land is a nostalgic ideal that has become increasingly popular well into this twenty-first century. For the pioneers of early America and the homesteaders of the west, land ownership was synonymous with survival. The land, along with animals supported by the land, was the primary source of food, materials for shelter, and energy.
Still today, land ownership provides many opportunities for sustainability. While few people buy land to produce their own equivalent of Campbell’s Soup, there are many viable agricultural activities for land owners that are both fulfilling and profitable. But also, a piece of rural land can be the site for a renewable energy system that can free the owner from utility costs, and that can even generate profits by selling energy back to utility companies if the property is located on the utility grid.
When it comes to valuations in rural real estate, some of the factors that contribute to value may be quite different from those in the urban residential markets. When we examine the cause and determination of true value in any arena of a free market economy, the function of the principle of supply and demand resides at the heart of value. In this regard, scarcity creates greater value, and abundance creates less value. For example, in the oil commodities market, when oil reserves numbers grow larger, the price of oil goes down. If the reserves shrink, the price of oil goes up.
The value of renewable energy systems in light of the principle of supply and demand presents an interesting twist. Renewable energy, by definition, is energy derived from an abundant, infinite source, such as sunlight, wind, and the electro-magnetic fields of the earth. According to the principle of supply and demand, a system of energy derived from an abundant, inexhaustible supply would create less value in the energy produced (because the energy supply would be rendered infinite.) This result may explain why the development of alternative energy systems has lagged significantly as our world has entered the age of technology. However, one could argue that a renewable energy system, by virtue of capitalizing on supply and decreasing demand for energy, causes an INCREASE in value – for the system itself, and the land that supports it! In this regard, rural land with existing or the potential for renewable energy systems may benefit in value as new technologies pertaining to such energy systems develop in the decade to come.
(Reprinted from Ranch & Country Magazine Winter08 Issue)