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2012 – Annual Land Study Report


Norman C. Wheeler and Associates with offices in Bozeman and Missoula, Montana, have completed their annual market value and land trends report for 2012.  The primary report represents an annual accounting of large ranch and land sales throughout Montana relative to transactions greater than 640 acres in size.  The report also identifies market values and trends associated with the general market relative to smaller tracts in a range of 80 to 640 acres.  The report provides additional information based on historical studies which have been prepared by the firm for the past 30 years relative to the rural ranch market related to Montana and the western United States in general.


While the data is specific to Montana, it typically relates to trends regarding large land parcels within the ranch and recreational markets of the Intermountain West.   The Montana sales reported are similar to those selling throughout the West relative to highest and best use and market trends or movement in general.  The Montana data has been found to be consistent in market indications for real estate movements throughout the general Intermountain region as related to large land purchases.


The values set forth in the study are not intended to represent appraised values and are not indicative of market value for any individual property.  The data is provided as a service to provide indications of trends which have been seen relative to the overall markets.  As in any year, the data reported herein is not considered to encompass all sales which have occurred within the context of the market or the criteria of the study as research is ongoing.  However, the data covers the majority of sales known and is considered to be reliable.  Historically, the study has proven to be relatively accurate subject to annual updates as more sales information is provided or confirmed.  Montana is a non-disclosure state and as such, sale values associated with property transactions are not reported within public records.



General Market Trends

 The following Chart (A) illustrates the volume of deeded acres sold within the primary study area specifically since 2001, with references to 1990 and 1995.  What is seen and has been reported in previous studies is that the market previous to 2010 peaked in 2005.  The number of deeded acres sold within the category of transactions studied topped 323,000 acres in that year.



Chart A – Source Data – Norman C. Wheeler & Associates


After 2005, sales began to diminish in concert with national trends and the lowest volume year since 2005 in Montana was documented in 2009.  Sales levels in 2005 were subsequently topped in 2010 and have subsided to near 2005 levels in the last two years.


 A significant shift in the matrix of the market since 2005 is that now the study is populated by fewer, but larger sales.  In 2005, the data studied encompassed over 100 sales.  In the past two years, overall transactions in the study have fallen to less than 50 sales annually.



Generally, the data indicates that trends were upward through approximately 2005 when the market as previously reported began to stall.  By 2006, it was evident that volume associated with the overall market was falling and this trend continued through 2009 as the market decreased not only in volume but also in market value.  By 2009, the market reached one of its lowest points with approximately 66,822 acres of land transferring within the context of the study area.  Also by 2009, the decreasing market had reached a floor relative to price.  Sales were subject to distress and banks were placing properties on the market to be cleared. 



Chart (B) illustrates the volume of dollars expended in 2005, at nearly $460,000,000, remains the peak year.  The year 2009 reflects the lowest volume of dollars as well as the lowest land value per acre on average as will be shown in Chart (C).  The peak year in average per acre land values was 2007.

Chart B – Source Data – Norman C. Wheeler & Associates

As the market in the study area bottomed out in 2009, it created an uptick in the market as seen in 2010 as sales become more frequent. Buyers were moving to capitalize on low values and also agricultural buyers again entered the market as price points fell.  For many years, the higher values associated with ranches had precluded agricultural buyers.  As values reached historic lows, we saw Montana ranchers and established investment owners moving to aggregate and expand.  There was a clearing of older inventory that had been reduced and new inventory that had faltered.



The accelerated buying that occurred in 2010 also included purchases by the State of Montana.  The State moved on over 100,000 acres of cut over timberland in western Montana for wildlife habitat.  Typically, these kinds of lands are not seen within the context of the database and thus the overall volume and value associated with the market is somewhat high in 2010 because approximately a fifth of the market was represented by government buying rather than open market transactions. 



Typically, government purchases tend to be somewhat over market as these usually involve purchases of properties based on appraisal and these properties are not exposed to the actions of the open market.  Less government sales in 2010, the volume associated with the general ranch or land market associated with larger parcels are similar to what was seen as continuing trends in 2011 and 2012.   



The lands the State bought were both private and conservation lands being sold away from a large Plum Creek disposition in 2008.  That sale alone constituted over 300,000 deeded acres but it is not included in the database study as it was not representative of the typical market transactions studied.  The Plum Creek lands sold to The Nature Conservancy and the Trust for Public Land and were financed in part by legislation.  They were industrial timberlands, not recreational or ranch investment lands.



While there was more land sold in 2010 as indicated, the overall dollar volume associated with these lands was not substantially higher than 2011 and 2012.  This is expected as the market had reached its floor in 2010.



The following Chart (C) illustrates unimproved land values associated with the larger sales within the study.  It indicates that the market peaked in 2007 relative to specific per acre valuesand by 2008, the market had begun to transition downward.  As indicated, by 2010 the market reached its lowest value on a per acre basis at $628 per acre overall, which corresponds to the highest amount of sale volume seen in the market study over the past 10 years.


Chart C – Source Data – Norman C. Wheeler & Associates

In 2011, the market overall moved upward to approximately $846 per acre, and this was mirrored in 2012 with the market averaging approximately $834 per acre overall.



The values illustrated on this chart are representative of overall per acre values associated with all lands within the study.  Within the data set of sales found related to properties greater than 640 acres in size, there are varying types of properties and land classes. The overall average indicated here is indicative of the market but not specific to the different segments of the market as will be set forth in the following section.


2011 to 2012 comparison

Deeded Acres sold greater than 640 in primary non-eastern market

Sale Volume in Dollars overall

Straight Avg







 $    273,994,314

 $   846



 $    258,632,689

 $   834



Appraisals and property valuations over the past four to six years have been difficult, and in many instances, appraisals have been prepared based on older sales which have been time adjusted to be representative of the current market.  Some sales from active market periods running through 2008 have had to be adjusted downward so that they are indicative of the current values.  Sales which were seen during the transitional part of the market, especially when the market reached its lowest point, have had to be adjusted upward to offset sale conditions associated with distressed properties. 



This process has led to less than reliable value indications in some instances.  However, within the context of the current market, we see enough volume and sale activity to conclude that in our opinion, sufficient data now exists to estimate market values associated with the market in general based on a limited view looking backwards to late 2010. 



Our analysis of the market suggests that values indicated by sales occurring primarily in 2011 and 2012 are now applicable or reliable as comparable sales.  As such, historical perspectives provided by older information, as referenced in the previous charts, has become less applicable for valuation and more appropriate for general interpretation.



To specifically review the market over the past 24 months, we see that in 2011 approximately 323,000 acres transferred for an overall value of about $274 million.  This equated to an overall per land acre of $846 per acre relative to the land studied on an unimproved basis.  In 2012, this data was again approximated with about 310,000 acresreported at this time.  These sales grossed nearly $260 million and indicated an overall per acre value of $834.



What the data does not reflect up to this point is that the majority of the market related to 2011 and 2012 was comprised of particularly large ranch or land sales which began to occur in 2009 and 2010.  As the market began to re-emerge after its downturn in 2008, what was seen was that the strongest segments of the market were large properties, particularly those with high productivity or strong productive histories. 



Sales indicated that buyers re-entering the market absent appreciation and speculative considerations which were seen in earlier market times, were now more concerned with productivity and cash return.  Unlike sales in the Midwest which tend to have higher return rates associated with them on a rental basis, these larger property sales throughout the West are typically properties which at best will pay their general operating expenses with nominal returns of 1 to 2% on a rental basis. 



As the market transitioned, it was evident that what were typically considered to be the smaller buyers, those being the $1 million to $5 million buyers, were absent.  The properties which typically marketed within this value segment of the market did not appeal to the re-emerging larger buyers due to the fact that many of these smaller or higher priced properties on a unit basis did not have sufficient cash flow or productive resources to cover their base operating expenses.  Often properties seen in this smaller segment of the market are higher amenity recreational tracts whose value is based on their recreational and amenity features rather than their productivity and size.



The following summary indicates that in 2011 six larger sales constituted 59% of the total deeded volume associated with the market study.  In 2012, five sales constituted 77% of the market volume related to deeded acres sold as well as 62% of the value associated with the overall market.

Large sales

Percent of Market Volume - Acres

Percent of Market Value















Specifically, these larger sales reflect per acre land values running from approximately $552 to $672 per acre when viewed as a class comprised of only larger transactions. 


This value range is considered to represent the upward side of what is considered to be the higher amenity agricultural ranch market.  These larger properties, in addition to having good agricultural features and resources, still have important recreational and amenity based features. These can include timbered mountain lands, elk hunting, fishing and other attributes that are not typical of general operating ranches in the more semi-arid areas associated with eastern Montana, portions of Wyoming and other outlying markets associated with Nevada, New Mexico and Arizona.  These outlying markets contain what many refer to as true working ranches and their value is more strongly correlated to agriculture.  That being said, they have been affected in value by investor buyers and 1031 buyers moving from recreational ranch markets to agricultural base markets.



What is seen within the larger land markets is that there is a bifurcation between base agricultural properties which have limited amenities and agricultural properties which have recreational amenities.  The base agricultural properties have reflected fairly stable values over the past three to four years running at approximately $250 to $300 per acre for larger ranches being bought specifically for agricultural use.  Typically these properties have large lease components associated with them which are comprised of state or federal leases. They have less deeded land and less privacy or access control.  Several large sales in this market over the last few years have had two to three times more lease acres than deeded acres.




Base agricultural ranch units from New Mexico through the eastern plains of Colorado, Wyoming and Montana have reflected consistent demands subject to limited supply.  Commodity prices related to livestock have been increasing over the past several years and supply of these types of ranches are continually constrained.  Many are held by strong investor owners or in multi-family or generational ownerships and are rarely exposed to the market.  There have been several large transactions of such ranches in Wyoming and Montana within these past 24 months.  These types of sales are not included within the primary research related to this study which as referenced is more indicative or representative of the recreational market associated with ranches.




As the recreational ranch market has expanded and values associated with these properties have increased, there is pressure on larger agricultural ranches.  We expect that values associated with sales of base agricultural ranches will reflect higher values in the next 12 to 24 months most likely running in the range of $300 to $400 per acre.



Relative to the larger recreational ranches which evidenced a 2012 average of $672 per acre, the most recent of these higher amenity sales would indicate that values associated with these properties have already exceeded that average.   Again in consideration of expected limited supply, we anticipate that sales occurring in 2013 will exceed the average as indicated for 2012 by possibly 10 to 15% within the next four to six quarters.



The largest ranches that sold in 2011 and 2012 are not backstopped by new or expected listings and as such the Montana market has been cleared of its larger recreational ranch inventory at this time.  There are no large ranch listings in the recreational market in the size range represented by the 5 large sales in 2012.  These trends indicate diminishing supply which is expected to continue relative to these segments of the market. 



The following summary reflects that less the six large sales in 2011, approximately 135,000 deeded acres associated with the balance of the market sold.  Only about 72,000 acres moved in the study area absent the largest 5 sales in 2012. 


Large sales

Percent of Market Volume- Acres

Percent of Market Value

Deeded Acres sold greater than 640 in

primary non-eastern market

Less biggest sales




















Absent the largest 6 sales, the overall land value average indicated for 2011 within this segment of the market moves to $1,303 per acre for the 132,779 deeded acres.   The 63,442 deeded acres in 2012 indicate a $1,370 per acre average for lands less the 5 big sales. These values are indicative of the average associated with what are typically considered to be smaller sales within the context of the study, smaller being generally less than 10,000 acres. 



Within these segments of the market what is seen is that generally larger ranch or land parcels tend to reflect an average value of approximately $950 per acre. 



Smaller tracts with good recreational attributes which may run from 640 to several thousand acres in size are reflecting values falling at approximately $2,750 per acre.  These are more recreational oriented properties with less emphasis on agriculture production.




Water amenity properties less the big sales are reflecting an average per acre land value falling at approximately $4,000 per acre.  Several very high amenity fishing properties sold in 2011 and 2012 at average land values close to $7,000 per acre.  These units not only had good fishing and water resources, but also strong agricultural production and cash flow potential. 



The land values indicated for general and recreational oriented properties are relatively consistent; however, within the category of water amenity properties, we see a greater variance with base values of approximately $2,500 per acre running to as much as $10,000 per acre for premium larger parcels of important riparian or fishing habitat or resources.  The value associated with water properties is often due to locational attributes as there are definitely different segments of the market depending on river and location.  Generally, water sales are representative of a three-tiered market relative to value which is more dependent on location. Whereas, throughout the region it appears that general and agricultural recreational properties reflect more consistent values despite their varying locations. 



Within the larger study, it is interesting to note that amenity water properties typically represent less than 2 to 3% of the overall market in total. This indicates that these types of properties are in limited supply and that values related to these types of lands would be expected to increase in the market moving forward. 



Smaller Sales Trends


Within the study area, we also looked at sales running from 80 to 640 acres in size.  Over time, due to the large amount of volume associated with this segment of the market, we have not been able to provide consistent data.  However, as volume has decreased related to the market in general, data for 2011 and 2012 as it relates to these segments of the market is considered to be reliable enough for reporting purposes. 




Approximately 11,000 acres traded within this segment of the market in 2011 and these lands reflected an average price of $2,915 per acre. 



In 2012, approximately 9,000 acres traded within this segment of the market, and these sales reflected a value on average of $3,216 per acre. 




When one bifurcates the land values into the specific land categories represented by the sales, what is seen is that smaller water properties have moved from approximately $6,000 per acre in 2011 to $7,200 per acre in 2012. 




General recreational properties move from approximately $2,500 in 2011 to $2,700 per acre in 2012 with agricultural lands reflecting upward value movement more specifically related to productivity rather than market changes. 



This market also illustrates a re-emergence of speculative development buying in and around primary markets such as Bozeman, Montana, and we see rapidly increasing demand associated with developmental lands in and around the city.  Market values associated with these lands fall consistently 40% to 60% below those indicated by market highs seen in 2005 and 2006 at the height of the development market, but lands are now again moving.



A snapshot related to market value trends in and around Bozeman is provided by an analysis of current sales occurring to the south of Bozeman along the South 19th Corridor.  Between 2005 and early 2008, there were eight sales in this region.  These sales encompassed approximately 1,290 acres which reflected an overall average land value of about $49,000 per acre.  These were lands being purchased to be developed relative to the expanding residential market associated with Bozeman, Montana. 



Within the past 12 months, there have been five sales in this same area south of Bozeman which encompassed approximately 465 acres; however, the average sale value associated with these properties is now at $27,000 per acre. 



We are seeing sales in the valley area northwest of Bozeman moving from market highs seen in 2006 and 2007 of $30,000 per acre to current sales within the context of 2012 at $5,000 to $6,000 per acre.  There has definitely been a strong shift in value related to development property in and around Bozeman and other cities throughout western Montana, but a strong re-emergence of the development market has not been seen in any area other than Bozeman at this time.



When one looks at various submarket areas throughout the study area, what is seen is that in many areas there is little or no sale activity, but this is reflective or emblematic of limited supply rather than limited demand based on the indications of our study. 


General Trends


Significant changes which have been seen in the re-emerging market.  In general, list prices now do have relevance in relationship to the sale price of properties.  When the market was running hot, often list prices had little relevance to sale price of properties as listings were over inflated.  Within the context of the current market, it appears that the majority of properties selling are moving at approximately 7% to 12% of list price.  This is considered to be related to the fact that the market is more stable and brokers have a greater and more thorough perspective on market values.  They also have gained a new appreciation for the amount of diligence required to substantiate value for the typical investor buyer now entering the market as they are exhibiting much stronger requirements on productivity as well as they trust market value.


Buyers are no longer willing to enter the market at speculative values, which in the past were rapidly corrected by the increase in appreciation associated with the market.  Buying decisions are being based on the primary consideration that these are stable long-term holds that as indicated will provide operating income within many segments of the market.



As the amount of speculative demand as well as development in the market has decreased from highs seen in 2005 and 2006, we have seen changing market activity related to conservation easement sales and tax donations associated with easement appraisals.  As the market values of properties associated with rural properties have diminished and since many sales are now based on productivity, the underlying value effect of conservation easements has lessened. 



In the upward market, the value associated with conservation easement encumbered properties was often based on their productivity and in a market in which all lands are now moving toward productivity as their basis, a historic difference in value will no longer be as evident in a limited supply market.




Historic data consistently indicated that in a market that was well supplied, agricultural buyers would shy away from or discount properties subject to conservation easement due to the restricted property ownership rights associated with them.  However, within the context of an under supplied market and the conditions reported, these factors are less apparent.  The ability of owners to gain substantial tax benefits through the application of conservation easements in this market is limited.  This is market related but is also a result of special appraisal rules enforced by the IRS to the disadvantage of the land owner or their family.  



The following Chart (D) illustrates a rapid decrease in Montana of lands being placed under conservation easement since a high in 2003.


Chart D – Source Data – State of Montana



As always, Norman C. Wheeler and Associates wishes to express their gratitude to the brokers, buyers and sellers who have assisted in gathering confirmation of sale data as it relates to the overall market. 



As initially identified, the data set forth herein is not considered to constitute an appraisal nor should it be considered to be representative or indicative of any specific property.  This data is general and intended to be reflective of trends rather than specific values.  As described, different segments of the market vary widely depending on factors such as size, location, and highest and best use. 



We thank all for their assistance and continued support of Norman C. Wheeler and Associates, and we hope all find successes in 2013.



 Clark Wheeler

Norman C. Wheeler & Associates - June 2011
General Market Conditions and Sales



Currently, the market is bifurcated into various submarkets with values based strongly on the locational characteristics of properties as well as their Highest and Best Use.



In over-supplied and transitional markets values continue to soften; whereas, in scarcely supplied markets values appear to be steady or increasing based on emerging sales. Scarce markets include agricultural production lands and high amenity large ranch ownerships. All markets were low in sale volume during 2008 and 2009 but emerging sales show some strength in specific sectors with others reflecting substantial downward adjustments.



There is strong evidence within the Montana land market, as well as throughout the West, that properties transitioning backwards and away from probable uses related to development are exhibiting the greatest amount of decrease in demand and value within the current market. Conversely, properties which have high quality recreational amenities are in demand, but are scarce. The sales of these types of properties are suggesting increasing market values based on a limited number of sales.



There is increasing activity in the transitional market that exists between base agricultural lands and high amenity recreational lands. As the following chart shows, within this segment of the market transitional lands are exhibiting downward value movement. These are properties which during heavy demand and scarce supply reflected upward value movement as outlying markets with lesser quality recreational characteristics begin to sell at higher values more reflective of top amenity markets.



There were also agricultural lands that spiked upward by anticipated development demand for large tract or common ownerships within larger rural ownerships. Many major rural developments have been shelved or gone bankrupt in the current cycle. As these properties are remarketed what is seen is that entitlements or planning expenditures such as government approvals and access to sewer and water, roads and utilities, have minimal or no contributory value. The anticipated uses that drove values between 2005 and 2008 have evaporated. These properties are still desirable as they are marketable, but lower transaction values reflect a major shift in Highest and Best Use and changing buyers.







However, within the market we still see occasional strong sales but these tend to be aligned with high amenity recreational ranches that are in short supply. While they reflect strong values in the current market, these properties were not spiked by development or speculative buying. Many were listed at very high values in the 2005 to 2008 cycle and simply sat out. These are what we often refer to as the insincere listings. They are now moving for what their market value would have been in 2007 and 2008 when they were over-listed. Thus, they do not show the decreases related to changing Highest and Best Use and again noting these particular properties are scarce.



Base agricultural production land in western Montana has always reflected somewhat of a premium compared to eastern Montana. Over the past buying cycle, however, base agricultural production lands in western Montana were driven to even higher values. Due to supply and demand, these lands transitioned to values more reflective of better grade recreational properties which were scarce.

The outlying and more marginal, close in properties escalated rapidly in value to catch the already high valued recreational market. Now the marginal segments are transitioning back in value due to a lack of demand, an oversupply and transitioning market features. They are falling back toward what will be established as the clearing price for agricultural land in western Montana. Based on historic trends, we expect this value to be 20 to 30% greater than base agricultural values seen in eastern Montana.



Values related to agricultural properties in eastern Montana, particularly large livestock ranches, have remained fairly consistent over the past several years based on limited volume. Much of the volume seen in 2010 was primarily comprised of an investment entity that purchased multiple large ranches in the Miles City area. Absent the actions of that one buyer, it is not evident, based on other demand or sales in the eastern Montana market, that the volume associated with that market would have increased substantially in 2010. In early 2011, a 52,000 acre ranch purchase in central Montana sprawled into a buying opportunity that grew to over 170,000 acres in 6 months. That sale is specific to one buyer and a specific area and provides limited data about general market trends in central or eastern Montana.



Overall, sale volume in 2011 is increasing as are average land values but these are based on larger sales and sales being made in the more steady segments of the market. These are not commodity based agricultural transitions and are related to both scarce property and scarce buyers. Scarcity governs production agricultural land markets and high recreational amenity properties. Owners of these lands are not sellers, and instead are more likely to be buyers.


Marginal segments of the western Montana land market which lack desirable amenities are reflecting a substantial lack of demand. This becomes the unrepresented part of the market in which many properties simply sit. With no demand and no purchasing power related to these properties they are not reflecting a clearing price.



The factors exhibited in the market at this time must be held against the background of low interest rates. If interest rates within the market start to move, then we expect diminished value for agricultural production land and increasing downward or unrepresented value for many segments of the market.

In markets that are falling, we have seen certain value changes. These have been analyzed and summarized from the complete data retained in our working files. A summary of these downward adjustments seen in the market has been omitted herein for confidentiality purposes. However, our database contains 19 specific larger parcel resales or paired transaction between 2006 and 2011 that exhibited value losses due to the factors set forth above. These involve over 100,000 deeded acres and a total sale volume of nearly $115,000,000. The range of loss runs from -22% to -65% and overall they average a -44% loss in overall market value within this period.



These sales lead to a conclusion that within the general market, sales that are older than 2009 or 2010 in some instances require a substantial downward adjustment to provide indications consistent with the current market.



A recent study by a major agricultural lender documents an average loss between 2006 and 2011 of -52% in western Montana relative to this market.

We have also documented sales showing increased or stable values for sales related to higher amenity larger units. These are related to site specific sales or agricultural production land sales within stable markets. We have confirmed sales of over 270,000 deeded acres in volume within the larger parcel market over the past 12 months which involved over $170,000,000. A summary of these sales is also retained within our working files but is omitted herein for confidentiality purposes.



Our research indicates the best interpretation of the data is based on an overall market discount rather than trying to identify annualized rates. The application of any adjustment is not general however. Different segments of the market are less affected and some show no loss. The application of any adjustment to sale data always requires substantial market experience and appraiser competence. It must be carefully considered on a sale by sale basis.
The point must be stressed one more time. Look for evidence of adequate sale analysis as to each specific sale referenced as well as competence and experience when presented with sale data within this market.
Please feel free to contact our office for additional information. Thank you for your interest -- Clark Wheeler

N. Clark Wheeler was a recent invited speaker at the Ninth District Federal Reserve Bank of Minneapolis. On May 18, 2011, Mr. Wheeler, owner of the 53 year old appraisal firm of Norman C. Wheeler and Associates, made a presentation on agricultural land values and trends within the district to the bi-annual meeting of the Agricultural Advisory Council to the Ninth District at the bank headquarters. The talk was attended by the bank president, Mr. Narayana Kocherlakota, as well as senior staff and the council. The talk was followed by a question and answer session and Mr. Wheeler was invited to attend the entire council meeting including roundtable discussions related to commodity and real estate values and trends. Norman C Wheeler and Associates, with offices in Bozeman and Missoula, Montana, works throughout the region on a wide variety of valuation projects.