It’s hard to generalize anything about the Far West aside from its proximity to the coast.
The area has such diverse territories—from deserts to almost temperate rainforests, and massive metropolitan centers to sparsely populated rural regions—that comparing their rural real estate markets as a region is all but impossible. But there is one thing in common across the Far West; there is a shortage of desirable ag land.
What counts as “desirable ag land” differs based on where you are and who’s asking, however.
For Todd Renfrew, broker/owner of California Outdoor Properties and president of Land Leader, “desirable ag land” meant many things to his customers in California. It meant leased grazing ground, working winter ranges, irrigated pasture, and recreational properties with a lot of features about an hour outside of the big cities. In all categories, there was not enough of it.
“There’s buyers out there, but it’s got to be at the right price,” he added.
Properly-priced properties were in short supply for Jack Horton of AgriLands Real Estate. Horton mostly works in Oregon farm and ranch land rather than recreational properties.
“There are not that many good properties on the market. If they are, they’re overpriced. People aren’t willing to pay those prices, particularly cattle ranchers,” he said.
“I have not seen such a disparity in asking prices versus what sellers are willing to take for property in all my years of being in the business.”
Price nostalgia
The problem of over-priced properties is generally a problem of price nostalgia. People remember the prices properties were getting in recent years when commodity prices were strong. Cattle and corn prices have come down in the past few years, making nostalgic prices unrealistic.
“It’s an interesting time out there,” commented Horton. “The cycle has been to the top, peaked, and the people who wanted to sell are going to have to lower the prices.”
He also noted that, because of those good commodity years, many potential sellers are in a good debt position.
“There were about five to six years of just premium prices and very positive cash flow. A lot of people got out of debt so they don’t need to sell.”
Renfrew had much the same to say, noting that a lot of potential sellers are in a good situation financially. Most of the sales he saw in the past year were due to the “three Ds of real estate:” death; divorce; and debt.
“A lot of times, the parents have died and one of the kids wants to stay on and the other wants to sell that’s been causing sales,” he explained. “Unfortunately, we see it so often that they’re not prepared for it and then the kids end up fighting and getting lawyers.”
When asked who is buying—or wanting to buy—Renfrew said the field is too diverse to generalize.
“There are the cattle guys who aren’t getting the lease ground they used to and they now have some income and are looking. There’s also people from the Bay Area who want their kids to experience a ranch life. There are people who are retiring from business and want to have that lifestyle. So, it’s not just one type of buyer.”
It’s not neighbors too much, though. Neighbors buying up nearby land to expand is often a dynamic in farm and ranch real estate, but Renfrew said few working ranchers are willing to pay the prices being asked.
Renfrew also reported that the demand for land for nut orchards has slowed.
“I think the buyers have gotten a little more picky on what they’re buying, but they’re still out there. It’s just not as crazy as it was. And it was crazy.”
Horton said he had a lack of “legitimate buyers” last year, but there were also a lot of “dreamers” who wanted the perfect properties, in the perfect location nearby, for relatively little money.
Looking ahead
Horton echoed the concerns of land brokers interviewed by WLJ and USDA projections; the fall of 2018 will see some lending problems.
“The bankers who I deal with are starting to become concerned with some of their borrowers. Not all of them, but some of them,” he commented.
“This coming fall is going to be a tell-tale time in terms of borrowers being able to pay off their operating loans. … Those who have had to borrow money over the last couple years, they’re getting into the second year of carry-over and their bankers are going to say, ‘We need to liquidate.’”
Though not good news for sellers, this potential does represent an opportunity prospect for buyers.
Renfrew was mostly optimistic for the future, citing a stellar year in 2017 with a lot of buyer energy and the continuing strength in the stock market. However, the start of 2018 in California gave many people pause.
“December was really scary. No one wanted to bring up the D-word. Everyone was thinking about it though,” he said, referring to the state’s bone-dry December. “We’ve had rain so far in January, so it will be interesting to see what happens.” — Kerry Halladay, WLJ editor
