“Buy land, they’re not making it anymore,” said Mark Twain, which rings even more true today. Brokers who spoke with WLJ wished there was more land, as the lack of inventory and the number of buyers has made it a seller’s market.
“Right now, if I had the ground, I would sell it,” Stacy Callahan, a broker with Hayden Outdoors, told WLJ. “Inventory has been kind of hard to find.”
According to USDA’s Land Values 2021 Summary published in August, farm real estate value, a measurement of the value of all land and buildings on farms, increased over 2020 with the highest growth in Texas (9.6 percent), followed by Oklahoma and Utah (6.9 percent each), New Mexico (4.3 percent), and Arizona and Colorado (1.3 percent each).
Brokers said the majority of sales are either through 1031 Exchanges or with cash.
“There’s a lot of people with cash out there,” James Sammons, a broker with Briggs Freeman Sotheby’s, told WLJ. “A lot of people want to have a ranch and the size of the ranch is relative. The production capacity is not as high on the totem pole as it used to be, and that is not a motivating factor.”
Texas
Sammons said buyers are “all over the board” flush with cash, looking for different types of properties, acreages and price ranges in Texas. According to Sammons, some buyers don’t mind traveling to the property, and some want it close to the Dallas-Forth Worth area. Unlike last year in Texas, Sammons said there are not as many 1031 Exchanges or buyers looking for an investment.
Sammons sold two sizable ranches in 2021: the 9,154-acre Gearhart Ranch in Fort Davis for $31 million and the 4,772-acre Livermore Ranch in the same area for $17.5 million.
Last year saw the sale of several prominent ranches in Texas, including the famed 6666 Ranch and the 31,631-acre Sandow Lakes Ranch east of Austin, along with the listing of the 80,000-acre “Prize of the Panhandle” Turkey Track Ranch for $200 million.
Dr. Charles Gilliland, research economist for Texas A&M’s Texas Real Estate Research Center, wrote in Texas Land magazine that strong demand resulted in a shortage of listings in the first half of 2021. As a result, prices rose 16.29 percent to $3,433 per acre statewide, and prices continued their ascent into the third quarter of 2021, increasing 25.21 percent to $3,725 per acre.
In the third quarter, Gilliland noted that a total of 743,425 acres totaling $2.77 billion were sold, with the average property size of 1,236 acres.
“All regions experienced double digit price increases with most regions posting substantial increases in the total acres transferred,” Gilliland wrote. “Market participants reported an abundance of investment-motivated buyers competing with recreational buyers and urban dwellers seeking a countryside retreat. In addition, farmers and ranchers have enjoyed increases in commodity prices, fueling demand for cropland.”
New Mexico
Sammons said while there are plenty of buyers, it depends on where the property is and what it is. Buyers are looking for properties around Santa Fe and ranches throughout the state. Sammons currently is listing “El Sueсo del Corazon,” a 350-acre “grand hacienda” ranch near Abiquiu that was formerly a cattle operation with several outbuildings and corrals.
According to Lands of America, the overall value of ranches, farms, hunting land, and other rural land and acreage for sale in New Mexico amounts to $3 billion and covers nearly 2 million acres. Of the 33 counties in New Mexico, Santa Fe County has the most farms and ranches for sale. Looking at data recently recorded through the Lands of America Comparable Sales program, the most land and rural property sales were recorded in Otero County.
Oklahoma
Callahan said prices in recent years have increased dramatically. He sells properties in both Oklahoma and Kansas, and has seen ranch properties go from $1,850 an acre for unimproved land to $3,000 an acre for improved ground with a home.
“We had a 700-acre tract that brought $3,000 an acre, which was surprising, but it seems like the norm,” Callahan said. “Even in Oklahoma and Kansas, (property) on modest ground is asking around $2,500 (an acre). 2021 has definitely been a game-changer as far as values going up out of the comfort zone of some ranchers to be able to pay that kind of money.”
Oklahoma State University Extension showed the weighted average of all land between 2018-2020 for tracts of 500-1,000 acres was $1,572 per acre, and tracts over 1,000 acres averaged $1,575. The majority of sales for the period were tracts of 100-200 acres, with 1,712 sales averaging $1,835. The biggest increase in land values was around the urban centers of Tulsa and Oklahoma City, the northeast portion along the Interstate 35 corridor and in the Panhandle.
Callahan noted that 1031 Exchange purchasers are one reason prices have risen. Callahan said he, along with other brokers in the area, has 1031 purchasers who quickly sold their property and then are forced to purchase something “last minute” before the 180-day period to do like-kind exchanges expires, resulting in paying capital gains taxes.
Additionally driving prices higher, Callahan said buyers from out of state are looking for recreational properties. Callahan said most recreational buyers have been in the Flint Hills area of Kansas. Still, he has also sold several recreational properties in Oklahoma’s northeast and north-central regions. Callahan recently closed on a 1,500-acre property in the western portion of Oklahoma with ranching and recreational potential for $2,400 an acre, but did not think the buyer was interested in using the land for ranching.
Arizona
Harley Hendricks, owner of Harley Hendricks Realty, told WLJ there are very few ranches on the market with good water and a “nice headquarters” in the $2-5 million range.
“We sold out of nice rural homes,” Hendricks said. “There’s a lot of money out there that if I had the right properties, I could sell them. I have five buyers who could write a check today for a nice ranch that met their criteria.”
Hendricks said while there are some ranches in the $20 million range, there are not a lot of buyers, or the location is not ideal. Hendricks currently has two listings: a 29,000-acre parcel near the Mexico border and a 21,000-acre parcel in central Arizona.
Hendricks said his buyers are 1031 Exchanges and buyers with money from other sources, but the lack of inventory makes it difficult for buyers.
With the ongoing megadrought, water is an important issue in the state as the Bureau of Reclamation issued the first-ever Colorado River water cutback resulting in an 18 percent reduction of Arizona’s annual apportionment.
In recent years, private investment companies have purchased farmland in a buy-and-dry strategy, selling the water to neighboring cities. According to the Arizona Republic, these companies purchased 8,863 acres in three counties in 2021, adding to their existing holdings of 8,642 acres.
Hendricks said while there was some activity of private investments purchasing farmland, buyers were taking advantage of drought insurance and buying ranches with the intention of not putting cattle on the ranch.
The Land Values Summary pegs the average farm real estate values in Arizona at $3,900 an acre, with cropland acreage at $7,700.
When asked about what holds for the real estate market in 2022, both Sammons and Callahan said the market will remain strong, but could not predict if prices will continue their ascent as in previous years.
Callahan said the real estate market, as with everything, is cyclical, but he hasn’t seen any indicators of a downtrend and is optimistic. — Charles Wallace, WLJ editor
