Montana Ranch Market Down From Peak

OMAHA (DTN) -- The Montana ranch market has come down from its peak two years ago, but large ranches continue to sell, including a historic, 134,482-acre ranch that had been listed with brokers in the state for nine years.

The IX Ranch, which dates back to the early 1880s, in north-central Montana was listed at $66 million for 66,896 deeded acres and another 66,586 acres of federal, state and private leases. Dating back to when Montana was still a territory, the ranch has only had two sets of owners since that time.

The property, which is about 100 miles northwest of Great Falls, Montana, supports a cattle operation with about 4,300 head, and the deeded ground for the ranch has nearly 4,400 irrigated acres as well as 4,215 acres of dryland cropland, 55,430 acres of native rangeland and more than 2,000 acres of forest.

The ranch was officially sold on Aug. 1. David Johnson, a real-estate partner for Hall & Hall in Bozeman, told DTN that he and the sellers, the Roth family, are under a confidentiality agreement not to disclose the new owners or the price paid for the IX Ranch.

MONTANA RANCH MARKET COOLING

Montana ranch sales have dialed back from a record-breaking 2021 when COVID-19 and the romanticism of the television show "Yellowstone" led to a push of wealthy buyers looking to buy both homes and ranches in the state. Brokers in 2021 saw the most expensive ranch sales in the state's history along with a large volume of sellers willing to list their properties.

The market has slowed in 2023 in large part because there are fewer ranches on the market, said Andy Rahn, creator of Montana Land Source, a listing service that specifically tracks large farm and ranch sales in the state. Montana is relatively secretive about how much a large tract of land sells for unless the buyer and seller agree to release that figure. But the volume of listings for properties of 200 acres or more is down 75% from 2021.

"We're correcting now and it's slowing down. There is still a lot of demand. Most brokers will tell you they have got buyers, but there's not much inventory. Our inventory is at a real low," Rahn said.

Hall & Hall's Johnson agreed with Rahn. "For a couple of years, we were selling three times the normal volume, and that sucked up a lot of inventory. So, we're definitely short on inventory right now."

There's also a widening gap between what sellers want and what buyers are offering in the market right now. The median list price Rahn tracks is $2,318 per acre right now -- about 15% higher than 2021 listing prices. But the median sale price in 2023 is $1,288 an acre, down 33% from the 2021 highs. That's a spread of $1,030 an acre between the median list price and the final sale price. In 2021, that spread between median list price and final sale was $239 an acre.

"Right now, we're seeing a lot of price reductions as we're going through the summer," Rahn said. He added, "But these big ranches are still getting top dollar."

That market for large ranches is "exclusive and rare," Rahn said, which often makes it hard to fit them into real-estate trends, he said. "The market seems to be doing one thing on the whole, and then a giant ranch comes along and catches an unbelievable price. That's what's so unique and specialized about that segment of the market."

Asked whether interest rates are playing much of a role, Rahn said he recently had a conversation with a broker who has a well-qualified agricultural buyer who is looking to expand their operation. The buyer is frustrated sellers aren't adjusting prices because of the higher interest rates. The problem is a lot of people buying Montana ranch ground don't need to worry about financing the sale.

"The Montana market is dominated by cash buying, not finance buying," Rahn said. "Even though most land is in agricultural production, the base in value is not in agriculture."

MONTANA BRAND -- RECREATIONAL BUYERS

The Montana brand goes way beyond the show, "Yellowstone." Visiting with producers in the state in late June, they pointed -- grudgingly -- to the 1992 movie "A River Runs Through It" as sparking the interest of wealthy buyers wanting ranch land off a stream with mountains in the background.

"It's the brand, the Montana brand, and it comes with a premium," said Colter Devries, a ranch broker in Billings, Montana, and host of a weekly "Ranch Investor" podcast on Montana's land market. "Today's average buyers are not your typical owner-operator. We are basically seeing buyers who are well capitalized from other means. That's a trend that's been growing over the past 20 years."

That demand for recreational property is as high as it has ever been, and it's changing the landscape. Ranches are increasingly sold with sellers pricing in the monetization of wild game, and buyers in a lot of cases are more interested in the number of elk on a property than the number of livestock it can support.

"The single biggest influence in the last three years -- and it seems to have risen to the level of notoriety -- are out-of-state elk hunters," Devries said.

Devries contrasted buying a high-end townhouse in New York City versus a large ranch in Montana. "It's irreplaceable. It's an entire ecosystem. You essentially own a national park."

What happens in that rural gentrification is that a lot of local producers can get priced out of land, Devries said. An owner-operator might not be able to easily expand in Montana. He said he's seen producers who sell their Montana acreage then use Section 1031 to buy a larger ranch in neighboring Wyoming, for instance.

"That run-up in land values has allowed them to get themselves into a more efficient operation, one that secured their legacy," Devries said.

STILL OPTIONS FOR PRODUCERS

Jess Peterson, a rancher and lobbyist for the U.S. Cattlemen's Association, showed DTN a roughly 12,000-acre tract he picked up on a lease about a half-hour north of Billings. He had about 150 cows and 300 yearlings on the grass and was excited about seeing just what the fields could sustainably support. Asked how a young producer can compete in a market dominated by wealthy out-of-state buyers, Peterson said new owners will still need cattle to effectively graze the land to make it more beneficial for wildlife such as elk.

"But you have to be active to find those leases," he said. "You should be attending conferences, getting ideas, meeting people. There are opportunities, but you better be able to tell them a narrative and get results."

Walter Schweitzer, president of the Montana Farmers Union and a real estate agent as well, noted, "The big places are clearly out of reach for the average producer, but there are still some smaller places for sale," he said.

OTHER MONTANA RANCH LISTINGS

A few other large ranches for sale in Montana include the Camas Creek Cattle & Sheep Co., with 36,621 acres near White Sulphur Springs, Montana, about 76 miles east of Helena. That ranch, which supports about 1,800 cattle, is listed for $58.75 million.

The Wilks Brothers, among the largest landowners in the state, also have a pending sale on Bull Mountain Ranch near Musselshell, Montana, with 13,107 acres, which was listed for $22.379 million. Wilks Ranch Brokers cited the top feature of its ranch as "Easily one of the best elk hunting ranches on the market."

Also see "USDA Cash Rent, Land Value Numbers Released" here: https://www.dtnpf.com/….

Montana Land Source: https://mtlandsource.com/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

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