The first two quarters of 2012 have been the strongest in the history of Fay Ranches, Inc. We surpassed $100m gross sales from 25 transactions on July 12th, the earliest we’ve ever passed this milestone.
What does this mean? We’re not entirely sure, but I am going to attempt to answer that question.
The past four years have been tough, but things seem to be improving. We’ve been hesitant to speak openly about how well we are doing because of how fragile the domestic and international landscape is. We’re having a hard time trusting what appears to be the beginning of a recovery. But the signs are there. Barring any cataclysmic events, such as the European Union imploding , we believe we’re in the initial stage of a recovery in the ranch real estate market. The highest quality ranches, priced competitively, are selling. We have also seen a few multiple offer situations for the first time in years.
We’ve sold ranches this year in every price category and genre, from large working ranches over $20m to small fishing ranches in the $1m to $3m range and everything in between. The consistent theme is value. The ranch absolutely has to be priced at a value to begin with or it isn’t even getting shown. It’s not worth putting your ranch on the market at a high price just to test the waters. We’re finding that the disparity between list price and sale price is decreasing significantly. The current buyers have very sharp pencils, and there are enough sales in the past 18 months to provide data to support the valuations. Sellers are paying attention. If a quality ranch is priced correctly, the seller will have some leverage during the negotiations for the first time in years.
When I ask buyers why they have entered the ranch market, the reasons I hear are as follow:
- I feel the market has hit bottom, and I want to take advantage of the opportunities.
- I want to invest in something tangible that I can enjoy; I like ranches because there will always be a diminishing supply.
- I have frugal fatigue.
- My business is doing well, and I have discretionary money again.
So far, there are no speculators, which is good. The folks in the market right now are buying for the long term (more than 5 years). They want a secure investment and often some degree of family lifestyle and/or a recreational component. If the ranch generates some revenue, that is a clear additional asset. Today’s buyer does not want the ranch to cost a lot of money to own. If they can break even or have a net gain, it is that much more attractive.
Long story, short answer: We are tentatively optimistic that we are in the beginning stages of a slow and moderate growth market for ranches.