Ranch Market Update

The ranch brokerage market appears to be reemerging throughout the West. There are still pockets in which sellers have resisted adjusting list prices, but in general the adjustment has been made, buyers have come back into the market and ranches in all price ranges that are priced competitively are selling. Year to date Fay Ranches closed volume is up 68% from 2009 and we have over $50m scheduled to close by November 15th.

Several large ranches with list prices north of $20m are either under contract or have closed including the Sun Ranch and the Boot Jack Ranch. There appears to be a movement toward tangible, secure assets.

I just finished reading the most recent report from Clark Wheeler (ranch appraiser) on the state of the ranch market in Montana. Although his study area is limited to Montana there is application to the ranch markets of Colorado, Wyoming, Idaho and Oregon . According to Clark’s statistics the market appears to be flattening out “The higher amenity sale data indicates that the market may have shifted downward only 10% over the past nine months which indicates a slowing of value loss related to large parcels.” Appraisal information is inherently a lagging indicator, it appears the bottom of the market was the second half of 2009 and the first half of 2010.

The anecdotal and statistical information generated within the walls of Fay Ranches supports this trend. In 2009 there was almost a complete absence of amenity buyers. We brokered several ranches that were primarily distress sales. In 2010 we have seen a return of the amenity buyer fueled by a desire to place cash into an investment they can trust. These investments are being made across the board in terms of price range. The reasons given by buyers for entering the ranch market are several and often a combination of the following; a growing distrust of the stock market, a currency hedge in anticipation of inflation, a desire to invest in something tangible and secure, as well as a variety of lifestyle reasons, “I can enjoy the investment while I own it”, “I want a place for my family to assemble”, “I’ve always dreamed of owning a fly fishing (hunting) ranch”. There is also a perception that there is more value in the high amenity ranch market than we have seen in a decade.

The primary characteristic of the ranch market fueling the return of buyers is the recognition that there is a finite supply of product and less of it every year. Unlike the residential, commercial and resort markets, ranches cannot be mass produced. And the more unique or higher quality the recreational amenities are, the stronger the investment. This will lead to a faster return to appreciation than in those real estate markets in which there is a saturation of product.

We are seeing fewer “low ball” offers in the marketplace because list prices have been adjusted on a sufficiently significant percentage of the ranches being offered for sale that we are seeing a return of multiple offer situations.

During these challenging times Fay Ranches has managed to do very well relative to the decreased volume of sales in the marketplace. The axiom that business gets concentrated during slow times is applicable to the ranch market. We have grown as a company; in addition to the main office in Bozeman, we now have real estate offices in Telluride, Jackson Hole, Sun Valley, Bend, Missoula, Lewistown, Billings and Boise.

These are exciting times for Fay Ranches as we emerge from a challenging chapter having gained market share, expanded physically and adjusted our marketing plan to the changing times. We look forward to the years ahead and what we hope is a period of moderate and sustained growth for the long haul. We are in this to stay and look forward to the next transaction and the next decade.

Thank you all for your continued loyalty and dedication. I think one thing this recession has taught us is that life is short, have fun, make time for those things that are important. Sit around a camp fire with your family and friends more. Find a place to recharge. We’re here to help.