Montana land sales skyrocket to new highs in 2021 | National News

As the pandemic stretched into 2021, Montana land sales hit unprecedented highs.

“It’s just been staggering the amount of business going on,” said Jim Taylor, director and real estate partner at Hall and Hall.

Andy Rahn of Montana Land Source, which tracks such sales, called the year the hottest ever with almost 1.2 million acres selling compared to more than 800,000 acres in 2020. The record volume of sales was up 34% while inventory hit a record low, down nearly 50%.

“I think it’s going down in the history books,” he said. “It started with COVID refugees and then expanded to political and social refugees.”

Fewer parcels on the market prompted higher asking prices and bidding wars.

“We wrote a new rule book a year-and-a-half ago,” Taylor said.

Up, up

Rising inflation and the resulting increase in interest rates is not scaring investors away since many buyers are coming with cash in hand and see land as a great investment.

“I have done very few transactions contingent on financing over the past 30 years,” wrote Greg Fay, founder/broker of Bozeman-based Fay Ranches, in the company’s Land Investor magazine. “Modern land investors often pay cash.”

Fay said his company and partner Republic Ranches were both up more than 100% in gross revenue in 2021 compared to 2020.

“Rural land has evolved from a niche to an essential component of an investment portfolio in less than two years,” he wrote.

Likewise, Bozeman broker Jeff Shouse – who has spent 35 years selling farm, ranch and recreational property – said 2021 was “the most dynamic” year in his business career.

That was echoed by Hall & Hall real estate, which wrote in its blog, “The latter half of 2020 and all of 2021 have been the strongest real estate market that any of us have experienced.” That was a head-snapping turnaround, because at the beginning of the pandemic there was fear a long-term recession was coming, Taylor noted.

Montana even saw the most expensive ranch sale in its history – twice. First in September the Climbing Arrow Ranch on about 80,000 acres north of Bozeman was sold after being listed for $136.25 million. Then in December media mogul Rupert Murdoch bought the Matador Cattle Co. ranch in southwest Montana that was listed for $200 million.

Although not as expensive at $45 million, Fay Ranches sold the 6,300-acre Dome Mountain Ranch to Atlanta Falcons and Home Depot owner Arthur Blank. What was impressive is that it was Blank’s fourth ranch purchase in the Paradise Valley where he now owns almost 26,000 acres.

Why?

Realtors are citing a variety of reasons for the popularity of rural lands. The most obvious is the pandemic and the associated problems that come with living in denser, populated urban areas – masking and vaccine mandates, rapid disease spread and the closure of restaurants, museums and theaters that enhance city living. Other reasons include people seeking a state with more conservative politics, avoiding recent unrest such as protests, the ability and acceptability of working remotely and recurring wildland fires.

“COVID was a real reset,” Taylor said.

Buyers were also looking for a financial shelter to dodge taxes, Rahn said, sometimes paying cash for land and then refinancing to use the loan for other investments.

Unlike the 1980s, when buyers were running to Montana for its fly-fishing lifestyle idealized in Robert Redford’s movie “A River Runs Through It,” buyers the last two years were running away from something, Rahn said. That may mean they are less likely to stick around, he speculated.

Tate Jarry, a broker for Live Water Properties in Wyoming, Idaho and Montana, said he’d seen an increase in the number of 1031 exchanges, where owners swap one property for another to avoid capital gains taxes. People leaving California led that charge, he said, a state where drought and wildland fires have become an annual threat.

Public land

Bozeman’s Headwaters Economics has long touted the value of public lands as an attraction for people and businesses relocating. For many years the main market was retiring Baby Boomers, those born in the post-World War II era, seeking amenities like hiking trails, fishing streams, forests and national parks.

“While public lands are associated with travel and tourism activities — which are important in their own right — research increasingly shows that these activities are only one part of a larger amenity economy that is an important driver of economic growth across the West,” wrote Walter Hecox, professor emeritus of Economics at Colorado College, in a 2019 article. “Nature by its mere existence increasingly contributes to overall social welfare and quality of life levels even as we threaten to ‘love nature to death.’”

Hall and Hall is also seeing a new trend: “a dramatic and notable entry into the rural land market” by buyers in their 40s who want to check out, entertain family and friends, but are still interested in maintaining internet connectivity.

“We’ve been concerned about the next generation because as a class, they were renters and not buyers,” Taylor said.

Now that’s changing as they see real estate as a legitimate investment, he added. Others are looking to create a land legacy for their children and grandchildren.

As land prices have climbed, so have housing and rental costs. Headwaters said “communities across the country, in every state, are grappling with prices increasing at a rate not seen before, even during the housing bubble that led to the Great Recession.”

What now?

Hall and Hall is predicting the hot land market will continue into this year, although every broker is noting the amount of land for sale is at historic lows and prices are at all-time highs.

“This market cleared out a lot of inventory,” Rahn said. “If it didn’t sell, it was probably overpriced or had other issues.”

Montana Land Source said the median listing price per acre for parcels 200 acres and larger is $2,320 per acre this year compared to $1,741 last year.

Some buyers are complaining about the higher prices, but Taylor said he simply asks them to find anything cheaper. 

Right now, Hall and Hall has 15 to 20 closings right now, he added. In comparison, 50 closings in an entire year used to be worthy of celebration. He also noted a shared ranch near Ennis where he lives went 10 years without any new lots sold. Last year 22 of the lots were bought.

There was a bit of desperation and motivation by buyers in 2021, Rahn added. People still looking are more likely to be discerning and willing to wait for just the right parcel.

One difference in the sale of so-called “legacy ranches,” properties owned by a family for generations, is that most buyers aren’t looking to subdivide, Rahn said. That was more common when land sales were hot in the 1980s and large parcels were chopped into 20-acre ranchettes, prompting the conservation-minded bumper sticker “Cows not condos,” he added.

The ranch market has changed substantially in the 50 years Taylor has been in the real estate business. People used to buy acreage based on how many cows it could graze, now they are looking for trout streams and someplace close to town. However, one thing hasn’t changed.

“It’s a unique asset,” he said. “It’s hard to compare it to anything else.”