Intermountain properties immune to market woes

Oct 7, 2011

With soaring corn prices and a roller-coaster stock market, investors are finding ranch and farm lands more and more appealing. U.S. farm real estate value, a measurement of the value of all land and buildings on farms, averaged $2,350 per acre at the beginning of 2011, up 6.8 percent from 2010, according to statistics.

The average value of farm and ranch real estate in Wyoming on Jan. 1, 2011, was $540 per acre, up 3.8 percent from one year earlier, according to Steven Gunn with the Wyoming Field Office of USDA National Agricultural Statistics Service.

Farm real estate values in Wyoming have risen 10 percent, or $50 per acre, since 2007.

“If I wasn’t watching the news, I wouldn’t know that there was a problem in the real estate market,” said Blair Newman with Newman Realty, Torrington, WY.

Sighting one of his best years in the business, he’s seen a lot of interest in anything relating to agriculture. With good commodity prices and good cattle prices, there are people out there with money, ready to invest. “The best hedge against inflation is to by real estate,” he added.

Despite the drought in some parts of the country, the Intermountain area has had a great year. Clifton Berglee, Montana-Wyoming West Realty, Laurel, MT, said the recreational ranches in his area are very strong. “There is a lot of money out there for good recreational properties,” he said. “It is a much better market than last year,” he added.

Berglee cited wolf problems as one of the biggest deterrents for buyers of recreational properties. “They are devastating the elk population in some areas,” he said. But they are seeing elk moving into new areas, bringing recreational opportunities for other properties.

He also added that in his area, ranch lands without conservation easements are a hot commodity, adding that land value continues to be affected by politics on all ends.

Mark Norem, Norem Real Estate in Big Timber, MT, said real estate in his area has seen lot of activity in the last three months. “We have the more typical buyers back, looking for larger properties,” he said. Prior to that, he was working with lots of businesses and non-profits.

Norem said they are seeing corporate buyers looking for multi-use properties. “The larger properties are getting buyers willing to pay prices that are significantly higher,” he said. “The farm prices have been going up; we’ve been somewhat immune,” he added, discussing the real estate market struggles most of the states are seeing.

In the Intermountain area, cropland value increased 6.1 percent, from $1,197 on Jan. 1, 2010, to $1,270 on Jan. 1, 2011. Irrigated cropland averaged $2,050 per acre and dryland cropland was valued at $750 per acre.

Regional changes in the average value of farm real estate ranged from a 15.9 percent increase in the Corn Belt region to a 2 percent decline in the southeast region.

The U.S. cropland value increased by $260 per acre (9.4 percent) to $3,030 per acre. In the northern Plains and Corn Belt regions, the average cropland value increased 17.2 and 16 percent, respectively, from the previous year.

The U.S. pasture value increased to $1,100 per acre, or 1.9 percent above 2010.

Despite being less liquid than currencies, bonds or gold, farmland continues to be a popular investment for two reasons. First, it is a “real asset” that cannot be devalued by central bank or government policy. And second, its value is tied to the growth in agricultural con sumption being driven by emerging economies. Farmland prices in the U.S. Midwest, according to the Chicago Federal Reserve, rose 17 percent year-on-year in the second quarter, the biggest increase since the 1970s.

One Wall Street investor pointed out, “They aren’t going to make more land, but they’re going to make a lot more 30-year Treasuries.” — Traci Eatherton, WLJ Editor