Real estate prices stabilized in 2022 in the Far West region, partially due to the economic situation, with buyers looking for income opportunities from the land. Buyers are pulling out of the stock market and hedging against inflation.
Ken Bentz, owner of Bentz Warner Ranch Land LLC, told WLJ1031 Exchanges are “still a really big deal” for real estate listed in the $6-12 million range in Oregon and Nevada. However, Bentz continued, there are still a lot of cash buyers. The availability of the Pasture, Range and Forage (PRF) insurance program also drives some of the bigger deals. The PRF insurance program is designed to protect against losses of forage produced for grazing or harvested for hay, resulting in increased feed costs, destocking or other actions.
Bentz noted low inventory levels for working ranches in Oregon, Nevada and Idaho. Low inventory levels have kept price levels steady, and he doesn’t anticipate they will drop in 2023.
According to AgWest Farm Credit’s land values market snapshot, inventory for agriculture real estate is low, and demand remains strong. However, higher interest rates, input costs, commodity prices and the ongoing drought are risk factors for the Northwest market in 2023.
As of Dec. 22, 2022, the AgWest Farm Credit property sales database recorded 932 land sales with an average value of $5,881 per acre in the Northwest.
USDA National Agricultural Statistics Service’s (NASS) Land Values 2022 Summary showed the average farm real estate price per acre in the Pacific region of California, Oregon and Washington was $7,040/acre, up 9.7% from 2021. California has the highest average value per acre at $12,000/acre, followed by Washington at $3,100/acre and Oregon at $3,040. The region’s average cropland value per acre was $8,580/acre, up 10.9% from 2021.
Bryon Clarke, a broker with Hayden Outdoors in Washington, told WLJ that last year the market was a little slow due to the economic conditions and after talking with builders in the area, they pulled back slightly but are ready to jump back into the market this year. Clarke said they had quite a few 1031 Exchanges from people in the area and out of state from buyers looking for a family retreat with some income and to put some acreage under the Conservation Reserve Program (CRP) or into easements.
Clarke said they were able to match the buyers with ranchers who held grazing leases prior to closing the sale, in order to generate income for the property and keep it in agriculture status to save on property taxes.
David Harris, owner of California Ranch and Land and Golden West Land Company Oregon and Idaho, told WLJ the dynamic of buyers has changed since the pandemic, from buyers purchasing property as a second home to keeping the property as a working ranch.
Harris said most buyers were cashing out of investments in the latter half of 2022, and business was active during that period.
“A lot of people that were sitting on the fence decided good ground is an excellent hedge against inflation,” Harris said. “A good piece of ground that has water rights or is very productive as far as grass production is going to be a good hedge against inflation.”
California
The California chapter of the American Society of Farm Managers and Rural Appraisers’ (ASFMRA) “2022 Trends in Agricultural Land and Lease Values” report showed rangeland sales were limited in the northern San Joaquin area. Values were highest in the eastern and northern
portions of the region due to higher rainfall and closer proximity to populated areas. Grazing land in San Joaquin, Stanislaus and Merced counties was appraised between $600-3,000/acre, and prices were holding steady.
In other portions of the state, sales of ranches were mostly for rural residential, recreation and
agricultural use, with prices typically ranging from $650-2,000/acre in the Monterey area. Sales in the Central Coast region are typically divided into two groups: parcels of 1,500 acres and smaller and parcels of 1,500-15,000 or more acres. Prices range from $750-7,000/acre for smaller parcels and $300-1,500/acre for larger parcels. ASFMRA noted that sales had been limited and prices had been stable for the two regions.
Sales in the Sierra Foothills were primarily for home sites with grazing uses and the expansion of existing cattle operations. Prices comprised a wide range, with the lowest in Mono and Inyo counties at $500-2,000/acre, to east El Dorado and Amador counties at $2,500-8,000/acre.
Harris said there had been a slight softening in prices of just a few percentage points, but concurred with some of the figures ASFMRA stated. He said on the east side of the upper Central Valley, prices for dryland ground were $2,500-3,000/acre, and on the west side, they were about $1,500-2,000/acre. Harris said prices go down the further north you move up the state.
Harris said buyers are breathing a sigh of relief from the recent rains, but properties with reliable water rights are the ones that will garner the highest prices. Harris noted these properties would typically go for double the average price per acre and are going from grassland to being planted into orchards and vineyards. Harris said cattle operations are either moving into the foothills of California or moving out of state to Oregon and Idaho, as land prices in the two states are lower and more economically viable for ranchers.
Washington
Clarke said people who are selling are concerned about water rights and current regulations regarding riparian setbacks. However, he noted that buyers from states such as Montana or Idaho are seeing that “you get more bang for your buck” in Washington.
AgWest Farm Credit noted dryland values are stable to increasing in value due to competition between long-time landowners and out-of-area investors. According to NASS, non-irrigated land values were $1,450/acre in 2022, 10.7% above 2021.
“There’s a limited supply of irrigated agricultural real estate,” AgWest Farm Credit said in their report. “Market participants are cautious because in many cases, commodity prices have not kept pace with rising interest rates and input costs.” NASS pegged irrigated land values averaged $8,400/acre, up 7.7% from 2021.
Clarke said grazing acreage with timber in the state’s eastern portion sells between $1,000-3,000/acre, depending on water availability. Clarke said they recently sold riverfront property for $4,000/acre to Western Rivers Conservancy. Irrigated apple orchard land can garner between $30,000-50,000-plus per acre, depending on the variety of apples planted. Clarke said land planted with newer apple varieties such as Honeycrisp and SugarBees would command higher prices while the classic varieties get less per acre.
Clarke said buyers have been “sitting on the fence and seeing if properties are going to drop on these ranch properties” and noted prices have been steady.
“We’re getting calls now from people who are saying ‘We’ve been watching your listings for a long time and we think this is a good time for us to make the jump right now and buy something,’” Clarke said. “So, it sounds like based on the number of calls and leads we’re getting it’s going to be a very productive summer for us.”
Oregon
According to Land and Farm, an online real estate listing service, recent data shows almost 300,000 acres of ranches for sale in Oregon, valued at a combined $575 million. The average price of ranches for sale in Oregon is $4.8 million.
Harris said dry land values in eastern Oregon sell for around $1,000-1,500/acre for productive ground and $750/acre for less productive acreage. Harris saw a piece of irrigated ground with excellent water rights in the state’s northeastern portion sell for $7,000/acre.
Bentz, who has been a broker for 20 years and also ranches close to 1,000 head of cattle, said the majority of his business is working ranches and investors. Bentz said for properties with 500-600 head in Oregon, the price would be $7,500-10,000 per animal unit month, but the numbers change upward if you can have PRF insurance.
Bentz said the value of water continues to outpace the value of land as more buyers pay attention to water rights—whether ground or surface rights.
Bentz said in addition to water availability, buyers are looking for ways to control wintering costs with access to fall feed.
“Most of these ranchers have fairly early spring turnout, pretty good summer grass, but few have good fall food unless you are lucky enough to be on some sort of river or wild meadows trying to find fall feed is sometimes difficult,” Bentz said.
Brokers are optimistic about 2023 despite the economic uncertainty and expressed that prices will remain stable as there are more buyers currently than inventory. — Charles Wallace, WLJ editor
