Wyoming land values adjustingWritten by Jennifer Womack
“If you compare the current market to the 80s with 2005 and 2006 representing the high,” says Pearson, “I would say we are about three years into a downward cycle which will continue for about two more years. Then that cycle would begin to see substantial sales occurring as prices regain the push upward again.”
“For much of 2008,” says Pearson, “land price were very good but began to decrease as the year drew to an end.” According to statistics and Wyoming appraisers, Pearson says the state’s land values on agricultural properties, which he defines as over 1,500 acres, grew nine percent in 2008.
“The average marketing time has increased along with the prices from 217 days to 385 days for Wyoming ground,” he says.
Despite the recent downturn, Pearson doesn’t believe Wyoming agriculture is heading for a repeat of the early 1980s. Unlike that time period, he says crop insurance is better, farmers and ranchers are holding less debt, the interest rate environment is friendlier and the ag sector as a whole has little financial leverage and hasn’t been forced to liquidate debt.
On average, Pearson says properties are selling at one to 14 percent below asking price. He doesn’t see a lot of ranches listed as a result of financial stress, but instead as a result of aging owners and the next generation choosing not to return to the family ranch. “Seventy-five percent of the transactions we’re involved in today have zero debt,” says Pearson.
Long-term, Pearson says land continues to be a solid investment. “Land is an inflation hedge. In the last two years stocks, homes and commercial real estate have decreased pretty sharply in value while land has held its value pretty darn well. In this uncertain climate farm, ranch, recreational and ag seems to be a pretty good investment.”
“There’s a lack of speculators in the market today,” says Pearson. “They’ve sort of gone away. People who were speculating can see that if they try to flip a place today and make a fast buck that it’s not going to happen. We see that as a dead market.”
A split market is among Pearson’s predictions for the near-term ag real estate market. “The more premium recreational properties and real good ranch and farm properties, will be selling at market. We think they will hold their value and are probably subject to stronger demand.”
On the other hand he says, “Some brokers feel prices related to what are considered less than premium properties, such as those lacking good recreational amenities and water, could fall back to 2004 and 2005 price levels,” says Pearson. “Some properties got an artificial boost,” he says of the 90s through 2006. “There were a lot of buyers and hype. Because they couldn’t buy in a really desirable area they’d go buy land in a less desirable area and overpay for it,” he says.
Pearson sees the market in a two- to three-year transition, during which prices will decrease. “I believe we started into that the last quarter of 2007,” he says. Believing that the recession truly started at the end of 2007, Pearson says they’re seeing ranches sell at about 20 percent below listing price.
“We’re coming off of historic highs,” he comments.