To say it is an interesting time is a bit of an understatement.  Last year I said it would probably get worse and it lived up to expectations.  Everywhere you look it seems it is one disaster after another.  Where do you put your money?  More often than not I hear “safe haven” more than “investment” when I am talking with a client.  If I had to choose between Gold and land I would have to go with Land, only Land can supply a return on investment and still have a base value.  Now it is becoming apparent that for as bad as our own and our government’s fiscal responsibility is it looks like Europe’s was worse.  One thing that hasn’t changed from last year is I still think the United States will be the lead economy when we come out of this recession or depression, depending on if you lost your job.  These are only my opinions and as always I recommend going into Real Estate in a very strong position with little or no debt.  

So what is actually going on in the land market in Montana over the last year?

Agricultural Land;

The market for Agricultural land, property with little or no perceived recreation value and whose value is thru production has held fairly well.  There have been sales for grass land in the $300 to $500 per acre which would be levels that were seen about 5 to 10 years ago.  Farm ground sales for Northern Montana have been in the $600 to $700 range for good ground.  Most importantly the majority of the sales have been to agricultural neighbors who are expanding their operations.  The second most numerous sales were to investors who are buying small tracks and leasing back to the local farmers and ranchers.  One notable exception is the purchase by the Mormon Church of several large ranches in Eastern Montana.  As in the land devaluation of the 80’s it was the local agricultural buyers that stabilized the market, this is what I believe we are seeing now.   It appears that this market is close to production values and I believe is in a place of good support for a long term investment with a return on your money.

Bare Development Land;

I would consider Bare Development   Land as land that best use would be sub-divisions or developed with some sort of business location but has no structure on property and is very close to a city.   This type of land has taken some real down pressure; I would guess 30 to 50% of 2007 prices.  There is very little development going on at this time so there is very little demand.  Owners that are leveraged are selling in the depressed market because they have to, but strong buyers are just riding it out.  For strong buyers who are looking out a couple of years this market could be getting close.  The economy will need to get started before this class of land will move up much.

Developed Land;

Land that has a large house on it has taken some real hits.  I have heard if some sales of 50% of highs.  It seems the more developed the property the bigger the price has eroded.  Some of the sales that are being made seem pretty attractive to me.  If you are in the market for a house in Montana I would be looking at some property.  Unless we really hit the wall with the economy I don’t see this market going much lower. 

Recreation Land;

I would consider this land in between Agricultural and Development land.  Recreation land would have amities such as hunting, water or scenery.   As a rule of thumb the more the development the more the price decline.  A large recreation ranch in Western Montana reportedly sold for less than 60% of its sale in 2007.  An extreme case I heard of was a large acreage, over 5000 acres, selling for less than the improvements were appraised at in 2007.  Depending on where the property is and how it is priced there maybe more room to the downside.  These properties just have too many variables to say too much about them in general.  I see some that I think are a good value and I see some that I think need some major price reduction.  There will be some recreational land that will have a return on it from agricultural lease also.

These opinion are those of Robert Fritz and do not reflect the view of Prudential Montana or anyone associated with Prudential Montana.