Recession? What recession?
It’s true that recent months have been filled with sobering statistics, such as declining Gross Domestic Product numbers, coupled with rising inflation, interest rate hikes, and soaring consumer prices. But it’s also true that jobs have been growing steadily and the S&P 500 notched its best month since 2020 during July.
The Latest Numbers from the USDA
The latest evidence in the recession discussion comes from the U.S. Department of Agriculture’s 2022 Summary of Land Values, which illustrates that this sector of the economy remains ‘full speed ahead.’ Consider these overall numbers for 2022, which show significant growth from 2021:
- Farm real estate value averaged $3,800 per acre, up $420 per acre (12.4%), the largest year-over-year increase since USDA launched the survey in 1997;
- U.S. cropland value averaged $5,050 per acre, an increase of $630 per acre (14.3%);
- Pasture value averaged $1,650 per acre, an increase of $170 per acre (11.5%).
DIFFERENCES IN THE INTERMOUNTAIN WEST
The Mountain Region, where Mirr Ranch Group mainly brokers ranch properties, didn’t see exactly the same gaudy growth levels. However, the increases over 2021 still were very strong in those states. Specifically:
- Farm real estate value averaged $1,390 an acre, up 8.6%;
- Cropland values averaged $2,320 an acre, up 10.5%;
- Pasture value averaged $783 per acre, up 9.2%.
Without a doubt, it’s generally good news when the value of your real estate investment rises. But it’s always wise to understand the underlying factors in the increase and be realistic about what it might mean in the long run.
For example, the American Farm Bureau Federation (AFBF) reports that the sharp increases in land values aren’t all the result of natural appreciation over time. “Price increases in farm real estate value can be attributed the rise in commodity prices that have translated to a higher farming value for land in row crop-heavy states,” noted AFBF economist Daniel Munch.
Munch also highlighted another reality of the growth, writing: “Fortunately for producers who own land, their equity has increased, but for those just starting out, or reliant on the acres they rent to make ends meet, these increases can become a barrier to entry.”
USDA Land Values Definitions
Farm: Any establishment from which $1,000 or more of agricultural products were sold or would normally be sold during the year. Government payments are included in sales.
Mountain Region: Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming.
Farm real estate value: The value at which all land and buildings used for agricultural production, including dwellings, could be sold under current market conditions, if allowed to remain on the market for a reasonable amount of time.
Cropland value: The value of land used to grow field crops, vegetables, or land harvested for hay. Land that switches back and forth between cropland and pasture should be valued as cropland. Hay land, idle cropland, and cropland enrolled in government conservation programs should be valued as cropland.
Pasture, grazing, and grassland value: The value of land that is normally grazed by livestock. Pasture does not need to have livestock grazing on it at the time of interview or during the current year in order to be valued as pasture or grazing land
SOURCE: U.S. Department of Agriculture
What about Resort Communities?
Not all western real estate numbers are rising in 2022, especially residential real estate in resort communities. The ‘Mountain Communities Report’ prepared by Land Title Guarantee in Colorado showed that “gross sales volume” of residential real estate increased over 2021 in Eagle (8.2%), Grand (8%) and Pitkin (3.4%) counties. However, that same figure declined in Garfield (17%), Summit (12%), San Miguel (5%) and Routt (-0.68%) counties. The report did show the average price of a single family home increased in all of those counties, ranging from 6.2% in Garfield to 61% in Pitkin.
It’s also worth remembering that land values alone aren’t the sole deciding factors when you’re examining your options to sell or buy a ranch property. These days, for example, one always needs to be mindful about issues such as drought in the West.
All of which are reasons why you should consider contacting the experts at Mirr Ranch Group when you are considering whether to buy or sell a ranch property.