The demand for rural properties continues to be strong, according to those who help buyers and sellers.
Don Hazlett, longtime real estate broker with Farm and Ranch Realty, Colby, Kansas, said the market for rural land is simple—it is hot. “The long and short of it is we’re seeing many more buyers than sellers. The listings are getting sold at a rate I have not seen in years and years.”
Hazlett has operated his agency since 1977.
Historically low mortgage rates and producers having more income have added fuel, he said. A year ago when corn was selling for about $3.25 a bushel it tempered buyer interest, but a year later with the price per bushel more than twice that per bushel it has spurred the market.
Irrigated farm acres with historically strong wells continue to top the market, Hazlett said, and he added that even some ground with less predictable long-term wells have drawn considerable interest from buyers and that has driven up their prices, too.
Paul Schadegg, an area sales manager with Omaha, Nebraska-based Farmers National Company, whose territory includes multiple states in the High Plains, is seeing land reach the record heights of 2012 to 2014, which followed a peak of record commodity prices. He has more than 20 years of experience in the industry plus a lifetime of observation and has seen many peaks and valleys in farmland values. The peak seven years ago was thought to be unreachable again.
“I thought back then I’d likely not see the value again for a long time and maybe even in my lifetime,” he said. “Right now the market is proving me I was wrong.”
The impact is not only pulling up high quality ground it is also pushing up the values of lesser quality crop ground. In some cases there has been a double-digit increase in values compared to a year ago when the market was slowed by the COVID-19 pandemic. He would not be surprised to see values be up 12% to 15% for the year.
“It keeps strengthening,” he said.
Higher grain prices
Another driver has been that grain prices have continued to go up as the market digests news of tight world supplies. The values are likely to go hand-in-hand, he said. The values have also caught the attention of non-traditional investors and they are helping to push the market higher.
Randy Dickhut, senior vice president of real estate operations with Farmers National, said farmland values have increased throughout the regions, particularly in comparison to a year ago at the beginning of the COVID-19 pandemic.
“People who wanted to sell property pulled back,” he said. “But we did start to see in the summer an increase in activity.”
Driving much of the interest in the market were particularly small tracts of land near urban centers where people who were able to keep their jobs and maintain their incomes were looking for 20 to 40 acres to build a cabin, he said.
The market for traditional farm and ranch real estate still had not taken off yet because of low commodity prices but by summer heading into fall it started to change, Dickhut said. Commodity prices were better and federal government payments designed to ease the financial burden were improving bottom lines and that really started to kick in by fall.
“This winter we definitely saw the buyer demand go up,” Dickhut said. “Farmers had a better year. The government payments and commodity markets were moving and they are still up. At the same time there was not a land of available.”
If the commodity prices stay high, he expects the trends to continue toward higher land values because new buyers and sellers see the investment opportunity particularly with low long-term real interest rates.
“Demand is driving the market right now. Combined with less supply in the market and low interest rates and if commodity prices stay high I think we’ll see farmers and ranchers continue to look to add more acres,” he said.
Each market is different
As in all cases, there are caveats, based on market prices, drought and other factors that influence regional markets. Pastureland also has other variables, including livestock prices and drought that changes its value.
Hazlett has seen an increase in values for producers wanting to buy grassland for ranch operations. Another trend is that people want to get away from the city life as a result of the pandemic and technology allows them to remotely work. One customer recently decided to sell his ranch at a premium in a more urbanized region to purchase ground in a more sparse area.
“[In] Colorado and Kansas you can get a lot more acres for less money,” he said.
Schadegg said he is also working with producers in urban areas who can get top prices for land likely to be developed for commercial and residential areas and they are willing to relocate their operation and buy a farm where prices are much lower.
Outside investors motivated
David Krien, a real estate associate with Re/Max Pro of Hays, Kansas, said he works with a group of investors that is taking an active interest in the market. Those investors are looking for a safe haven in light of the run-up in the stock market.
He remembers one man told about how pleased he was to have sold a tract of quality dryland acreage for $1,700 an acre but Krien said he knows of similar crop acreage that sold for $2,256 an acre.
The outside investment, Krien said, can help producers who might be leveraged and relieves their debt pressure. It can also help younger producers who are starting their farms and can rent ground. Krien grew up on a farm and ranch operation and understands the pressure producers face.
Krien said last year his records showed about $12.5 million in sales and it is already at about $15 million and he expects by the end of the year it could double the 2020 sales mark.
Buyers and sellers always need to do their homework, Dickhut said. Sellers need to promote their acreage in advance so there is plenty of exposure in the marketplace. They also might want to consider a public auction as a way to get top value. His advice for buyers is simple: “Be ready to act,” he said.
They also should be aggressive if the opportunity meets their needs but also to understand how it can fit into their operation and finances. Sometimes the right approach is to bow out and wait for another time to purchase additional property. With equipment and technology the need for adjacent property is not as much of a consideration as it once was, he said.
Hazlett said buyers and sellers need to do their due diligence. “Sellers need to get a market analysis.”
Auctions have also been helped sellers to earn top value. “When prices go up auctions are the way to go,” Hazlett said.
Krien’s advice to buyers and sellers is when they are wanting to either buy or sell farm acreage is to develop a rapport with a representative. He is willing to work for a lower commission and work with other firms to help clients achieve their goals.
He also believes in advertising, both in traditional ways and through social channels, to get the word out. Some investors do not want to be involved with public auctions and as a result Krien said sellers might want to rethink their strategy so that can been taken into account.
Schadegg reiterated the importance of buyers and sellers to continue to educate themselves about the market and define their objectives.
“The successful investor looks at it without any emotion and he has a target for his return on his investment,” Schadegg said. “The emotional effect is always going to be there. We often hear ‘I have never seen this land up for sale’ or ‘I always wanted to farm that ground.’”
Schadegg said the “once in a lifetime” mindset should be tempered with patience and staying within realistic game plan.
Dave Bergmeier can be reached at 620-227-1822 or [email protected].
