Far West real estate draws recreational buyers
—Buyers looking for fun in the west
Far West real estate markets in states like California and Oregon are picking up slowly but surely. High grain prices and the need for grazing land are driving some buyer interest, but recreational buyers are opening up new market opportunities for ag properties in the west.
Today’s Far West real estate market has been described as steady, but active.
“It’s still a buyer’s market. There’re people out there with money,” according to Todd Renfrew of California Outdoor Properties.
Bobby Lockrem of Sotheby’s International Realty Farm and Ranch division described the current market as stable from last year.
“Ranches in general are moving, especially smaller properties under $400,000 and bank-owned properties. We’re even having good luck with the large working cattle ranches, too.”
Tom Harrison of Oregon Opportunities Real Estate also said smaller ranches were selling, particularly anything under $700,000.
In California, crop- and tree-ground is selling well. The high price many grain crops are fetching lately, as well as the success of nut orchards in northern and central California, has made land attractive.
Farther north in Oregon, grazing land and properties with recreational opportunities are drawing attention.
Agents agreed that properly-priced properties are moving well. The catch is the “properly-priced” detail.
Lockrem said many sellers are getting more realistic, but memories of property values from the mid- 2000 bubble still influence the hopes of some. Renfrew agreed, saying, “A lot of people have the 2006 prices stuck in their minds.”
When asked who was buying and why, the responses differed based on location. In his Oregon based
territories, Lockrem said he was seeing a lot of established commercial ranchers expanding their grazing land, “hobby ranchers” buying small-acreage properties, and some purely recreational property buyers. When asked about nonag investors, he said he wasn’t seeing many.
On the topic of first-time serious farmers or ranchers, Lockrem chuckled. “I haven’t seen many people starting in ranching or farming for a while.”
California is a bit different, according to Renfrew.
He says he’s seen some nonag investment buyers.
“There is a new market of buyers from the dot.com companies who aren’t ranchers, hunters or the typical outdoorsmen. They are buying land to get away from Silicon Valley and as an investment.”
The reasons for buying vary based on the individual, but some trends were mentioned. Aside from those seeking to increase their grazing land for cattle, or looking for cropland to ease feed prices for their herds, motivations to buy are sometimes less direct.
Recreational motivations such as hunting, fishing, keeping horses and various forms of hobby agriculture were all among the more personal drives for buyers.
Lockrem cited the uncertain economy at home and abroad, the wobbly stock markets, and the weak dollar as potential reasons for buyer interest.
“People are trying to figure out what to do. They know money isn’t doing well. And right now, land prices aren’t astronomical, so buying land is feasible and affordable.”
He also speculated on a change in culture influencing land-buying behavior.
“I think people are moving back towards wanting a bit of luxury. Not extreme; people aren’t as interested in the 6,000-square-foot giant ranch house today, but a smaller house with updated amenities on some land.
“I think people are looking for a life investment,” he concluded.
Harrison also mentioned recreational and cultural reasons for buyers’ decisions. Good weather, fleeing areas of urban encroachment, the open spaces of the west, and access to travel opportunities all draw buyers’ interest. And for some, it’s simply a “desire for the lifestyle.”
As with the southwestern real estate markets, obtaining loans and today’s unsettled economic world are among the primary issues.
“The biggest obstacle [to growth in the real estate market] is the difficulty of getting a loan on land,” according to Renfrew. Like in the southwest, this has created a great opportunity for for-cash buyers. Several of the agents mentioned forcash buyers, the primary audience for large ranches.
The interest in recreational properties comes with particular financial difficulties. Since recreational land doesn’t have a dependable source of monetary return, it can be even more difficult that usual to get a loan.
The difficulty for buyers to secure public-offered bank or government financing has resulted in more sellers offering private financing deals. In such situations, owners will generally accept a certain amount down and allow for the buyer to effectively rent-to-own the property at a set rate.
The issue of economic and political uncertainty hampering real estate markets is something that can only be waited out.
“Until the market gets better, people will be sitting on their money,” Lockrem said of current trends.
Renfrew said a lot of the current hesitation to act has to do with uncertainty over the upcoming elections, as well as the economy. “A lot will depend on who gets elected.”
Harrison, on the other hand, said the extended economic downturn has caused some of those sitting on significant liquidity to act. “I think some people just get tired of waiting.”
The issue of water rights is another area of note in western real estate. The difficulty comes in the form of regional or state-based regulations and the fact water rights do not always go hand-in-hand with owning land.
Both Renfrew and Lockrem spoke of the importance of water on the value of property.
“Having water on the property and owning the rights will increase the value of the land. Just dirt for grazing can get $600 to $650 per acre, but with water, we’re looking at as much $3,000 per acre.”
Renfrew advised the issue of water will only get bigger in the west.
“Water is gold. A buyer really needs to understand his water rights.”
Projections for the future are conservatively optimistic.
“Happy thoughts,” said Lockrem. “You have to have a positive outlook. Things aren’t going to be what they were [in the mid-2000s], but it’s becoming more stable. And after the election, we may have something more to depend on.”
Harrison said he sees an improved market for recreational properties in the near future. “I think there will be growing interest in recreational properties as more people retire.”
Renfrew cited trends from last year, optimistically, when speculating about the future. “Our sales from last year were double what they were the year before.” — Kerry Halladay, WLJ Editor