Fewer large landowners selling ranchland in 2022

“The market never gets saturated,” Greg Fay, of Fay Ranches, said in a recent podcast. “Inventory is always a limiting factor of our deal flow.”

Part of that is because even some sellers can’t find a replacement property if they want to move on, so they have settled in to wait, according to Hall & Hall’s annual report.

Close to Billings, Hall & Hall has listed two ranches in Stillwater County. The 118-acre Beehive Ranch is listed for $2.89 million and includes river frontage. Nearby, the Beartooth Foothills Ranch‘s 686 acres are listed for $3.9 million.

Last year was an odd duck for land brokers. The pandemic years of 2021 and 2022 set records for ranch and recreational property sales and prices. As the market cooled last year, brokers had to spend more time seeking and educating sellers.

“Sellers still have that pandemic mindset,” said Ren Martyn, a Colorado broker. “So getting back to the 2019 pre-pandemic craziness is a challenge.”

Fay agreed, talking about one landowner who had a ranch that on paper seemed like a fair price at $9 million to $10 million. After looking at the property, Fay said he told the rancher he thought $11 million to $12 million would better capture the land’s subjective value. Then another broker said they could sell it for $16 million. At that price, Fay said he’s afraid the property will stay on the market.

“Our industry creates some of the problems,” he said.

Andy Rahn, of Montana Land Source, showed a graph of Montana land values per acre in 2023 staying pretty flat across the state, when compared to 2022. However, the number of sales dropped.

“Buyers are doing their research and sharpening their pencils,” Rahn said in Live Water Properties’ 2024 report. “They are willing to pay true market value, but not wishful market value based on what happened during the COVID years.”

Looking ahead, several factors could affect land sales this year, brokers speculated. They include continued concern about social unrest and political instability.

“I’ve got a buddy I sold a plantation to,” said David Ingle, a South Carolina broker. “He called me the other day and said, ‘David, when it all hits the fan, the reason I bought this place is because it has a bridge between us and the mainland. Get your family, get your stuff and get over here. You’ve got two hours before we blow the bridge.”

Another factor is higher interest rates.

“When interest rates were low, it wasn’t uncommon for buyers to purchase a property with cash and then mortgage that property at a low-interest rate and put their cash back to work for them in other high-yield investments,” Rahn told Live Water Properties. “With high interest rates, that’s not a viable option.”

As Baby Boomers age, the possibility of new properties being offered for sale could increase as ranchers and farmers look to cash in and retire.

“That’s going to give a lift to inventory in the upcoming years in my opinion,” Fay said.

Broker Matt Henningsen agreed.

“There is going to be an era of mom and pop ranches,” he said. “We’re going to see them on the market, probably for the first time ever, these ranches that haven’t been exposed to the market for multiple generations.”

Hall & Hall reported seeing some of that already. “Generational drivers such as retirement without younger family members to take over the farm or ranch, or asset consolidation for estate planning purposes, were the most common reasons for premium properties coming to market,” wrote B Elfland, managing director.

With inventory low but plenty of cash buyers seeking properties, land brokers continue to knock on doors to find premium properties.

Elfland reported Hall & Hall saw some of these off-market transactions that helped the company record its second-highest sales by dollar volume in the company’s history, topped only by 2021’s “post COVID-frenzy.”

“There were fewer sales, but on average, much larger sales than in 2022,” Elfland wrote.

“The top-weighted market was driven by the wealthiest land investors, who continued to pursue the highest-quality, premium amenity properties,” he added. “Many of these transactions were private sales exposed to a limited audience of qualified buyers.

“In contrast, less unique or less special properties sat on the market.”

One of the premium properties sold last year by Fay Ranches was the Bighorn River Ranch near Custer, advertised as a “true recreational paradise.” The 4,065 acres, with 7.5 miles of Bighorn River frontage, was listed for $20 million and sold last September.

Near Cora, Wyoming, Hall & Hall’s Jim Taylor sold the Bar Cross Ranch for the second time in his several decades as a broker. The 12,035-acre ranch, not far from the Wind River Mountains, was listed for $32 million.

“The large, top-of-the-line legacy ranches will always sell for top dollar regardless of the market, but the less desirable properties reflect the impact of a changing market more distinctly,” Rahn said.

Interestingly, Martyn said there are other features keeping landowners on their property along Colorado’s western front. These include money raised by placing property in a conservation easement. Ranches that have early water rights to the Colorado River are also leasing them out for cash payments.

“That’s precluding some of these mom and pop ranches, that could be first time on the market, from actually coming to the market,” he said. “They’re able to get dollars in their pocket and hold onto the ranch.”

With low inventory and prices for premium lands holding steady, Fay advised buyers there are no “steals.”

“Just buy the land you can’t wait to get back to,” he said.