At this point there is very little empirical evidence to indicate any trends in land values. It is fair to say that the market has been very slow since our last report and, while there are “buyers” looking around, there are not a lot of them and they are by and large looking for discounts that most sellers have been unwilling to offer. In short we have a “bid versus ask” differential whereby the spread is great enough that most buyers and sellers are not coming together. The few actual sales that we have seen have run the gamut from 15% to 20% off of 2006/2007 values to right at those values. Activity in terms of showings has definitely increased as we have moved into the spring season. The recent uptick in the equity markets combined with the relative security of real estate as an investment and as a hedge against inflation provides reason for optimism as we move into our selling season.

We have noted a number of “mini-trends” on the part of sellers. One of them is that we have seen price reductions where sellers have been dropping their prices at least to 2006/2007 levels. This has involved major price reductions in some cases because many sellers were anticipating that prices would continue to go up 20% plus per year after 2006 and priced their properties accordingly. It has become increasingly clear that this is not a likely scenario. The result of these price reductions is that a high percentage of the inventory on the market is competitively priced at those levels.

Another mini-trend is that, while sellers have become more realistic in their expectations, there is a fair amount of financial strength among them. In addition there is very little leverage employed in the world of rural real estate so that source of pressure that has been exerted to force liquidation and push down the value of commercial and residential real estate is simply not present in our marketplace. Most owners are simply tightening their belts. Therefore, we do not anticipate that a lot of sellers will capitulate. In fact, in many cases, sellers have simply removed their properties from the market or, alternatively, they have said very quietly that their ranch might be available if the right buyer should come along. We discussed this in our last newsletter and we have recently closed two transactions where this was the situation. In both cases all parties were pleased with the results of the transaction. These sales generally do not appear on our website because both parties to the transactions have requested confidentiality which is still available in Montana and Wyoming.

As we also discussed in our last newsletter, there is no question that there will be a limited number of sellers who will have reasons to discount their properties substantially to raise capital for a variety of reasons. This is where a few great buys may occur in the next few months.

On the buyer’s side a major trend has been an increasing interest in ranches and farms that will actually produce income or at least “wash their own face” as one prospective buyer elegantly put it. There has been a corresponding reduction of interest in recreational retreats, second or third homes in the resort areas, and shared ownership type offerings. The real estate markets in Jackson and Sun Valley have seen the least activity and our Steamboat Springs office has seen much of the same. Working farms and ranches have seen steady appreciation over the last ten years or so with some big moves up over the last couple of years because of dramatically higher grain prices and good cattle prices. This seems to have leveled off and we are now seeing some weakness in land prices based on a recent Sandhills ranch auction which came in perhaps 20% below the recent market. However, the cattle and farming business has been good enough over the last few years that sellers are few and far between. We feel that prospects for agriculture are quite good over the next ten years so properties that are economically viable in terms of producing crops and livestock should be in demand and the supply is limited.

We look forward to the upcoming showing season. Please be in touch with one of our partners if you have a specific interest in buying or selling or if you simply have questions about the real estate market. We are always glad to share our knowledge with our clients and friends.

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