John Goan

Broker

I wanted to give you a brief summary of the real estate market in the Big Sky area for 2011.  I also have a few thoughts on what to expect for 2012 based on the continuing trends from 2011.  I hope you are all well, and look forward to hearing feedback from many of you.

2011 saw a 41% growth in sales volume from 2010, and it is safe to say we have hit a plateau in pricing.  Sales volume however, continues to grow consistently.  Industry-wide, this is the ‘New Normal.’ 

Bank-owned properties are far easier to deal with than just a year ago, mostly due to more workable legislation and industry-wide precedence.  Sales growth in that sector accurately reflects the increased ‘workability,’ and I am expecting those numbers to remain level, or slightly decrease, in 2012.

For the first time in ages, we’re seeing multiple offers on bargain properties.  Competition at the lower price levels is starting to heat up a little bit, which is a great indicator for future growth.  The market is by no means dead, just cautious. That being said, most residential purchases are nearly all end users. 

There was only one clearly speculative land purchase this year.  All other land purchases in the area were end-user buyers planning to break ground on custom homes within a year.  Many projects are already underway.  Savvy buyers looking for a long-term presence have taken advantage of the soft market to add considerable value to their purchasing power.  Highly skilled construction crews are ready to work, and those that are, are building some of the highest quality homes in the area. Recent buyers are well positioned, and are creating considerable long-term value with their projects.

Ranch sales volume has remained surprisingly high, particularly among legacy and historic ranches with working acreage.  With the recent surge in commodity prices relative to other indices, we’ve seen substantial institutional investing along with end-user purchases.  Montana remains a great buy for production-land, especially since pricing hasn’t sufficiently caught up with commodity prices.  Wyoming has also seen significant production-land sales volume, mostly attributable to State income-tax policy.

Montana really is a phenomenal production investment.  Most ranchers keep their books close to the vest, but to give you an anecdotal example, my cousin netted over $200,000 on 350 acres of wheat.  Granted, last year was a banner year, but that’s incredible cash flow from a relatively modest sized parcel.  Commodity market conditions are unlikely to change significantly in the near-term.  If you’re in the market, you should seriously consider following institutional investors into the production-land market.  There are incredible opportunities for arbitrage if you have capital available.

I have included aggregate residential sales data below compiled from the Multiple Listing Service.  The Yellowstone Club sales data is not included.  They do not publicly report their numbers, although it is safe to say their volume was at least twenty-five transactions in 2011, cumulatively equaling the value of all other transactions in Big Sky combined.

 (Analysis by JP Goan, jpgoan3@gmail.com , for John Goan Big Sky Real Estate, john@goan.us . Reproduction and retransmission permitted with published credit.)

---------------------