At Mason & Morse Ranch Company we cover a variety of market segments including farm, ranch and recreation/lifestyle properties. While, 2015 was an excellent year for the real estate markets as the improving US economy and Federal monetary policy made production driven assets a favored investment class, 2016 has slowed continually as we moved through the year. The distraction and concern over the general election as well as the health of the economy has caused some trepidation. Generally, inventory has increased for good to excellent quality farm and ranch lands. The demand from buyers has subsided with lower cattle and grain prices impacting optimism. Recreation lands and lifestyle properties continue to show improvement in activity and sales, however, the buyers have a large inventory to consider and they have become discerning in terms of value.
Taking a closer look at specific markets, we observed the following trends:
Working ranch and grassland prices have declined through 2016 as cattle prices remained soft and continued downward into the fall runs. Ranch prices are not expected to improve any time soon and inventory continues to increase and price reductions are seen more and more on active listings. We have seen a decline of 15 to 20% on sold prices in a number of the larger grassland areas. The good news is that the concern over a significant decline in the stock market, has pushed buyer interest into the land markets. These buyers are, however, cautious and seeking value.
Recreation and lifestyle properties including horse properties have been slow. There remains a good selection of inventory and sellers have held strong on prices. It should be noted that some of the geographic areas for these “niche” markets are seeing varying results. The recreation and lifestyle markets have been slow to improve and concern over the economy as well as election year jitters are affecting buyer’s actions. There seems to be adequate inventory in most market segments.
Farmland values have declined over the last 12 months as commodity prices for grains have continued to decline. At this point, we have substantial inventories of grain and until we see either 1) a decline in the valuation of the dollar compared to the currencies of our export markets or 2) a supply interruption, typically drought induced, in a major grain growing area of the world, we expect grain prices to remain soft. We feel the direction of commodity prices will largely determine the value of farmland for the time being.
Overall, we expect 2017 to be more active year with more inventories. Demand from buyers will be driven by income consideration and value. The lack of other investment opportunities will keep Buyer demand strong, but discerning. Sellers have few reinvestment opportunities and it seems some sellers will only sell if they find a replacement property, making many transactions subject to 1031 exchange requirements. There remains an underlying concern about inflationary pressures that could change the markets rather quickly, although we have not yet seen those signs as the Federal Reserve has only hinted about interest rate increases.
At Mason & Morse Ranch Company we are active in representing both buyers and sellers across much of the United States. We have well qualified agents that are experts in their fields and they are prepared to assist you with your real estate buying and selling needs.