Northern New Mexico Ranchland Evaluation

What follows is a compilation anecdotal material relative to the market and demand for Northern New Mexico ranch properties in the present market.  This presentation does not go into depth but rather outlines, with attribution, quotes and observations from researchers and industry participants throughout the Rocky Mountain Corridor.

Much of what appears here mirrors what my clients have been sharing with me for years.  Taken together, this information can tell us much with regard to evaluating the relative value of ranchland listings in New Mexico.

This research has also contributed to the development of a proprietary scoring system I now use when pricing any ranch and/or fishing property.

Best Regards,

Dale Heinemann

Associate Broker/Director

NM Outdoors

History

·        “..anecdote, media coverage and testimony from range professionals suggest that a significant turnover in ranch ownership is underway.” -  (Gosnell & Travis, “Ranchland Ownership Dynamics in the Rocky Mountain West”)

·        Western ranches are not especially efficient producers of livestock and do not offer competitive profit or return on investment. (Gosnell & Travis, see)

·        “capitalization of annual earnings explained little of the market value for most New Mexico ranches, whereas the presence of wildlife had a significant influence on ranch values” (Gosnell & Travis, see)

·        “current western ranch ownership and operations patterns are changing because of the deployment of significant new wealth into ranchlands, especially in the last decade…this change is likely to continue and perhaps intensify” (Gosnell & Travis, see)

·        Most amenity ranches share a boundary with public land, a much sought-after quality among amenity buyers, along with trout streams, mountain views and privacy.

·        A new type of ranch development has emerged, the “fishing ranch” in which cattle are removed and lots adjoin a trout stream are sold, but buildings and fences are discouraged.

·        Ranches located in New Mexico’s prime mountain areas replete with wildlife and scenic views have risen in value 10%-12% a year (1996-2003 NMSU, Martin)

·        USDA data based on five-year censuses of farm and ranch values show that the average annual appreciation rate from 1992-2002 was higher than the average for 1980-1991 for all Rocky Mountain States. (Nature Conservancy)

·        New Mexico Farm and Ranch land values rose an average of 7%/year from 1992-2002 (Nature Conservancy)

·        Over 60% of ranch purchases 1990-2001 in Colorado & Wyoming were amenity buyers (Nature Conservancy)

·        Rural residential development in the Rocky Mountain corridor increased 400% between 1970 and 1997 – (Gosnell – “Ranching, fishing and the New American West”)

·        Beginning in the 1990s, ranch purchases in the RMC were driven by the specific goal of obtaining exclusive access to fishing (Gosnell – see)

·        Much of this market was driven by elite figures of the 20^th century, corporate moguls, Hollywood figures and those prospering from the technology revolution

·        In 2002 it was estimated that fishing generated between $236-$532 million per year in Southwestern Montana alone and between $67-$385 million per year in Yellowstone Park alone

·        Fisherman in Greater Yellowstone place a value of between $172-$977 per day of angling

·        New purchasers have few price constraints

·        They are preoccupied with “wild” trout

·        During fishing season, many properties managed for “rod fee” fishing in SW Montana are fully booked 5 years out

·        New amenity owners put emphasis on riparian fencing, fish ponds, improved irrigation usage and engage in recreation, aesthetics and conservation

·        Long time ranchers often market fishing opportunities on their land but seldom fish themselves

·        “In many ways, the influx of amenity migrants to Montana’s ranch landscapes has proven beneficial for the fisheries management cause.” – (Gosnell, Haggerty & Byorth, “Ranch Ownership Change and New Approaches to Water Resource Management in SW Montana: Implications for Fisheries” )

Price Components

·        “It is widely argued that ranches across much of the West are sold, or at least marketed, at prices far above their agricultural value… capitalization of annual earnings explained little of the market value for most New Mexico ranches,” while the presence of wildlife had a significant influence on ranch values.” (Gosnell & Travis, “Ranchland Ownership Dynamics in the Rocky Mountain West”)

·        “It is now widely recognized that the desirable rural lifestyle and agrarian values described by Martin have significantly inflated the market value of farms and ranches…Thompson (2003) noted that many Rocky Mountain ranches were purchased for recreation use and that income from livestock explained very little of ranchland value.  Few appraisers bother with an income appraisal for ranches judged to be recreational.” (Rimbley, Torell, & Tanaka “Why Grazing Permits Have Economic Value”)

·        It is now widely recognized that the desirable rural lifestyle and agrarian values significantly inflate the market value of farms and ranches…People want an investment they can touch, feel and experience.” (Torell, Rimbey,Rameriz,&McCollum “Income earning potential versus consumptive amenities in determining ranchland values”)

·        “In the past decade, sales of livestock ranches have been to a new buyer class that is motivated by the purchase of ranch lands for investment, recreation and prestige.  Prices have inflated rapidly beyond considerations for economic return on livestock operation.” (Thompson, “Recreational Ranch Appraisal”)

·        “…research shows that the recreation and lifestyle reasons for ranch ownership may be much broader than just the trophy ranches to which Thompson referred.  Expected investment appreciation, recreation and lifestyle opportunities and prestige now motivate the ranch buyers that have the financial resources to afford ranch purchases.” (Rimbley,Torell & Tanaka, see)

·        Wants:

1.     Live Water – desired for intrinsic sights and sounds, also valued for impact on vegetation and wildlife, also important for private fishing

2.     Community Amenities – within 30-60 minute drive of community with minimum population 1500-5000, (higher population – higher appreciation value)

3.     Proximity to Air Service – Commercial air service within 2-4 hours, private strip within 30 minutes

4.     Topography and Scenic Views – Mix of trees and open country, southern exposure, not too rough, not too steep

5.     Adjacent to Conservation Easement and/or Public Land – Several thousand acres of National Forest adjacent to a ranch is very desirable.  Privacy is key.

·        Negatives

1.     Access Problems -  Long private roads to maintain can be deal breaker, lack of winter access is an obstacle, landlocked properties require recorded easements

2.     Lack of Utilities – Water availability, power more important than telephone

3.     Higher Elevations – Elevations over 6000ft may be health problem for some buyers, over 9000 ft may be out of the question for most buyers

4.     Non Contiguous Parcels – Separate parcels are OK but not if they are widely dispersed

5.     Improvements Not in Buyers Taste – Buyers want to build their own homes

·        Live Water adds 6% to average values (Spahr & Sunderman, “Valuation of Property Surrounding a Resort Community”)

·        Distance to the nearest river, a decrease in distance to a stream improved property values by $259 per acre – (Sengupta & Osgood, “The value of remoteness: a hedonic estimation of ranchette prices”)

·        “Being located near attractive mountain ranges and streams that are a habitat of big game and trout fisheries enhances a property’s value.” (Thompson, “The Appraisal Journal”)

·        Location adds up to 30% to average value – (Spahr & Sunderman, “Valuation of Property Surrounding a Resort Community”)

·        Isolation is a disamenity, buyers find value in a certain amount of community

·        Access roads adequate for family travel

·        “A New Mexico study determined the presence of wildlife on a private ranch significantly influences its value.  A $6,000 bull elk permit attached to a quality private ranch in New Mexico will increase the land value between $28,000 and $127,000.” – (Knight & Johnson-Nistler, “The growing importance of wildlife values on rangelands”)

·        Ranches in high mountains with rough terrain sell for more than lower elevations and flat land.

·        Big trees are better

·        Commanding views from above of meadowland are positive

·        Relative isolation is valued

·        Land with potential for conservation easement implementation is very desirable

·        Amenity buyers who move to their property full time subscribe to the “one hour rule”: they want to live and work within an hour’s drive of good fishing, hunting, skiing and hiking – (Gosnell, “Ranching, fishing and the New West”)