Without question, 2020 was an unusual and high performing year for the real estate market, and 2021 presents many unknowns. Resort, sporting, and ranch real estate present an even more complicated picture. Owner/broker Ken Mirr offers his thoughts below on the 2020 ranch market, and what lies ahead for ranch buyers and sellers in 2021.
The 2020 Ranch Real Estate Market in Review
So what happened in 2020?
Going into the year, we expected 2020 to be similar, but likely slower, than 2019 given election year issues and other factors, and certainly, the pandemic changed that. There was a big interest in purchasing secondary properties outside of cities and areas with high population densities.
Buyers were concerned about where to put their kids in school and knew they may not be going back to their offices, so they began to think about a better quality of life and sought locations other than their primary residence to live. This caused a substantial interest especially near resort properties in the West.
Across the Intermountain West, most of the ski resort markets went off the charts and recorded some of the best years ever. And that, of course, impacted our ranch market as well. Mirr Ranch Group sales in 2020 clearly exceeded 2019, and this is especially true with ranch properties near resorts.
To help further illustrate my point about resort markets, 2020 sales in Pitkin County, Colorado were over $3.5 billion, which is a 90% increase over 2019 according to Land Title Guarantee Company. A similar increase was seen in Teton County, Wyoming, where the Teton County Multiple List Service (MLS) reports a total sales volume increase of 90% for 2020 to over $2.3 billion. Many resort communities saw smaller but significant increases ranging anywhere from 10% to 50%
Here’s a review of our sales in 2020:
A Push Towards Turnkey Properties
Sales performance differed across the various property types. In places like the midwest, many typically invest in farms for the income, and there are such farms in the intermountain West near major river corridors that do produce income. In 2020, the push wasn’t necessarily towards income-producing properties. Instead, there was a huge demand for properties near towns and resorts where you could still go out to dinner or buy a cup of coffee that also had existing improvements and turnkey operations.
In the end, there was greater interest in properties you could utilize immediately. Typically, buyers were looking for these characteristics:
- Within an hour of a resort area
- A well-maintained home
- Turnkey operations
Traditionally, while these considerations are important, recreational, conservation, privacy, and operational concerns are equally or more important. We always think a blank canvas is something that people will look at, and clearly, that wasn’t the case in 2020. These buyers were looking for properties with improvements that were good enough for them to use right away.
The 2021 Situation for Ranch Properties
A 2021 Ranch Market Forecast
Hard to say what 2021 will bring. But the biggest issue we see right now is the lack of good inventory. 2019 and 2020 were incredibly strong markets. Overall real estate inventory across Colorado was over 60% less in December 2020 than in December 2019 (source: Colorado Association of Realtors), and resort markets are seeing inventories drop to a similar degree. We are not experiencing such a drop, closer to 20-30% across ranch, farm, and sporting-type properties. This drop has created a seller’s market, and this is especially the case for properties in proximity to town, services, and resorts where the inventory dropped even further.
In contrast, the demand and supply will remain similar for outlying properties in more wilderness settings. Those areas haven’t seen the unprecedented sales growth resort areas experienced within the last year.
A Market Shift on the Horizon
Looking ahead, I could see a change in the market within three years. These new buyers who have purchased all these properties may have realized that rural life is not for them, and once the fear of the pandemic and all these other things subsides, they may leave the hinterland and return to metro areas.
We may see a return to a buyer’s market with an oversupply of inventory. But again, given that we focus on such a unique niche market, we expect it to be stable.
For that reason, unless we have a really big shift in our economic situation where we see another recession, I still see the real estate market, at least for ranch and recreational properties, realizing continued growth and steady supply and demand.
Advice for Buyers
My best advice for buyers is to have a long-term plan and be patient. Even though land may not have the return on investment of a commercial property, land always appreciates over time. You also get the joy of doing something, working and recreating on the land, and also, stewarding the land that benefits habit and the local community.
In addition to being patient, really define what you’re looking for. We work with buyers in identifying long-term objectives. Often, we get calls from people looking all over the West, and we need to start refining what they really want. What elevation do you desire? Do you want timber? Do you want pastures and hayfields? Do you need a fishery? How much water and irrigated land do you need? (Side note: Most people don’t know about water rights and how those rights change from state to state!) There are so many things that need to be identified.
Advice for Sellers
My best advice to sellers is don’t get too greedy. These opportunities, especially in a seller’s market, may not last long. Be disciplined, have realistic expectations, and continue to add value to your property. Avoid putting such high, hefty price tags that you miss the opportunity and you miss this market completely.
It is concerning when landowners see a market like this. I’ve seen these blips over the years, and they don’t last long. Then all of a sudden you miss the market and end up listing the ranch for three, six, or more years, and then the ranch becomes stale and you miss out on an opportunity.
To hear Ken talk about the state of the ranch real estate market, watch the following video.