MONTANA LAND VALUES
The Western Ranch Brokers team recently attended “For Land’s Sake – Montana Land Values Presentation,” hosted by the Montana Farm & Ranch Brokers Association. The presentation was part of the Montana Chapter of the American Society of Farm Managers & Rural Appraisers (ASFMRA) 2nd Annual Winter Real Estate Roundup. Appraisers from Norman C Wheeler & Associates, and valuation experts from Montana Land Source and Northwest Farm Credit Services all presented in depth content about rural Montana land values.
Appraiser, Andy Rahn, from Montana Land Source summarized the information presented at the event on Montana land values, concluding that 2021 was indeed an incredible year in the Montana land market. As Rahn noted, 2021 was the “hottest land market in Montana history.” Data shows the trends of high prices and high demand for Montana land will continue into 2022, but volume will be limited as extreme inventory challenges persist (to view the full presentation from Montana Land Source, click here). Rahn’s portion of the presentation included the following statistics of note:
- Record volume of sales – up 34%
- Record low inventory – down nearly 50%
- Older inventory was sold off
- High land values
- Improved properties suddenly in demand
- Record broken for highest price paid for a ranch – twice!
- Dramatic increase of off market transactions of “Legacy” Ranches
Industry experts presented exclusive data on the Montana land market in 2021 and also took a look back at the market over the last 30 years. Western Ranch Brokers identified some of the key takeaways from the event:
SALES PRICE & VOLUME
- Sales of property over $5M numbered 71, compared to 15 in 2020.
- The median sales prices in Q4 2021 were up 121% compared to 2020.
- 71% of the total spent on Montana land in 2021 were transactions greater than $5M.
- Ranches sold at 94% of asking price in 2021, compared to 75% in 2020, and 2021 saw a 34% increase in sales volume.
- The price per animal unit month (AUM) of ranches sold in 2021 was $15K AUM, with operational break even at $8-10K AUM. Current listings are priced at $20K AUM.
- Dollar per acre sales price for properties with 640+ acres in western Montana have been steadily increasing over the last 30 years, with an average dollar/acre value of $1,255 (1990-2020).
- Dollar per acre sales in western Montana reached a new high in 2021 at $2,115/acre.
- The average size of ranches sold has steadily increased over the last 3 years, from an average of 1,500 acres in 2019, to 1,700 acres in 2020, and 2,200 acres in 2021.
- The average property size for sale in Montana was 1,472 acres in 2021, a 59% increase from an average of 819 acres in 2020.
- Days on the market for ranches is just 250 days, from 500 days – a decrease of 50%.
- Overall rates of return on long term holds run at 8-10% annually, plus tax benefits.
- Western Montana’s top 10 Counties (in terms of dollar volume – 89%), are Ravalli, Granite, Beaverhead, Madison, Gallatin, Broadwater, Jefferson, Park, Sweet Grass, and Fergus. They accounted for 69% percent of sale transactions.
- 1.9M people were recorded through Bozeman International Airport in 2021 as compared to the previous all time high of 1.5M in 2019.
The presenters commented that 2020 should have been the start of a downturn in the Montana land market, but instead sales volume and prices both soared. The unexpected jump in the market is likely a result of the Covid 19 pandemic and the influx of new buyers. With the wealth of aging baby boomers transferring to a generation of younger buyers, the new wealth generated in the tech sector, and record stock market highs – there was plenty of new cash entering the market. This cash influx and the increased demand for “remote real estate”, as buyers looked to escape big cities, brought the Montana land market to it’s current all time high.
The year ahead isn’t likely to see a slow in demand or prices, but with very little inventory remaining in Montana, overall sales volumes are projected to be much lower than 2021. More properties left the market in 2021 than came onto the market – with sellers letting listings expire due to the difficulty of finding a replacement property. For those sellers who are able to put their Montana property on the market in 2022, the data indicates another year of top dollar prices. To read the full presentation by Wheeler and Associates, click here.
If you’re considering buying or selling a ranch in this competitive market, Western Ranch Brokers has the experience and market knowledge to help you successfully navigate any transaction. Contact Western Ranch Brokers for more information and to see how we can go to work for you.