Trophy ranches located in the Western states are referred to as belonging to the “high-end” rural acreage market. The definition of a “trophy” ranch is acreage with beautiful views, trees, streams, ponds and excellent hunting potential. The value of such property is determined solely by individual perceptions of a finite number of wealthy buyers; in other words, the pricing of properties in the high-end rural acreage market is purely subjective.
On the other hand, the “low-end” market is objective in nature (in other words, it is not influenced by emotions or individual perceptions). The term “low-end” refers to the lowest per- acre prices available anywhere in the United States. This market is much easier to evaluate, using pure, absolute numbers, rather than perceptions and emotions.
What about price fluctuations in the high-end rural acreage market over the last several years? The premier trophy ranch real estate brokerage firm, Hall & Hall located in Billings, Montana, recently announced that $160 million worth of purchase contracts had fallen through; sales had plunged from $1.2 billion in 2007 to only $50 million for the first half of 2009; and prices had declined another 20% in just the last six months.
Now, what about price fluctuations in the low-end rural acreage market? While the volume of sales has slowed somewhat, prices still remain near historical all time highs. Twenty years ago (in 1989) the lowest per-acre priced land in the United States could be found in Northern Nevada, West Texas, Northwest Utah, Eastern Montana and Southern Wyoming. Large tracts of rural acreage and rangeland could have been acquired at that time for as little as $10 to $20 per acre. Today, except for a few isolated examples, the lowest per-acre prices to be consistently found in these same areas would be $250 to $500 per acre. This represents a price increase of approximately 25-fold, while during the same period the Dow Jones increased from around 1,200 to a little over 9,000 – only a 7.5-fold increase.
Thus, history reveals that it is almost impossible to lose money owning large tracts of low-priced acreage, if it is purchased cheaply enough and held long enough!
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