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New Mexico Ranch Values Rise Thanks to Trophy Home Hunters

LAS CRUCES - Meanwhile, back at the ranch: A New Mexico State University economist has found that the old-fashioned idea of living off livestock is fading as new well-heeled owners enter the New Mexico's ranch market for the desirable lifestyle.

New Mexico State University researchers have found that the state's ranch values have risen steadily since 1986, with so-called trophy ranches in New Mexico's prime mountain areas leading the race upward. Premiums like wildlife and scenic views have pushed values up by about 10 to 12 percent a year over much of the past decade. (10/06/2003) (Courtesy Photo from New Mexico Department of Tourism/Jim Orr)

"Ranch values have just moved completely out of line with the ability to pay for it with income from the cows," said Allen Torell, an agricultural economist at NMSU. "Basically, you have to come to ranching with big bags of money, inherit it or be willing to work off the ranch."

In the study, researchers at NMSU and University of Idaho developed a statistical analysis and computer model to determine the value of New Mexico's ranches based on the sale of some 500 ranches from 1996 to 2002. The size of the ranches ranged from 320 acres to 180,000 acres, while costs varied from $14 to $1,000 an acre.

The study was funded by the U.S. Forest Service's Rocky Mountain Research Station in Fort Collins, Colo.

Torell, who has been monitoring New Mexico ranch values for almost two decades, said that the value of New Mexico's ranches steadily rose from the end of World War II until 1982.
At that point, ranch values dipped for the next four years as the equivalent of a stock market crash swept through the ranch real estate economy.

"During that period, farm and ranch lands lost nearly 50 percent of their value," he said. "The feeling at the time was that the market was simply overpriced and couldn't be sustained."

Since 1986, the state's ranch values have resumed their upward trend, Torell said. But recent advances have largely been specific to a particular type of ranch. Location is critical. Preferred locations for ritzy subdivisions and accompanying McMansions can bring higher prices and long-term appreciation, and the same is true for New Mexico ranches.

These posh ranches are frequently located in New Mexico's prime mountain areas, replete with wildlife and scenic views. The idyllic, yet rugged ranches have gone up in value by 10 to 12 percent a year since 1996, he said.

On the other hand, ranches that lack beautiful vistas and depend on public lands for grazing have moved ahead by as little as 1 percent annually, Torell said. That's not even keeping up with inflation, much less providing a sufficient economic return for these ranchers, he said.

This lack of return, based on diminishing financial land appreciation, has huge consequences for ranchers who rely on livestock sales as their main source of income, said Neil Rimbey, co-author of the study and a range economist with University of Idaho's Caldwell Research Center.

"We've found that no more than 20 percent of a ranch's value is determined by the value of the livestock that it can produce," he said.

The remainder is apparently tied up in the mystique of living in the country and owning a ranch in a beautiful location. "People still have strong agrarian values and believe that the country is a good place to live and raise a family," Rimbey said, who is conducting a similar ranch value research project in Idaho.

"It'll be interesting to compare the results of the New Mexico study with the one that we are currently working on in Idaho, Oregon and Nevada," he said. "One would hypothesize some major differences on ranches with seasonal grazing of public and private rangelands in the Great Basin as opposed to the year-around grazing that you see in most parts of New Mexico."

The study found that the price per acre of ranch land across New Mexico is highly variable, in part because of the amount of public and state land included in many sales. Federal agency grazing permits like those of the U.S. Bureau of Land Management and U.S. Forest Service often transfer with the purchase of the land.

"We've found that the higher the amount of public lands in the sale, the lower the selling price will be," NMSU's Torell said. "You're not really buying the land in this case; you're just acquiring the grazing right for an extended period of time. There's an awful lot of uncertainty about public land management in terms of the future availability of the grazing and what the fees may be in the future. "

In the future, Torell said that he believes trophy quality attractions of high elevations, scenic vistas, hunting potential and proximity to urban areas will only increase New Mexico's ranch values. That also means the trophy rancher who takes the trouble to put in range improvements, better housing and increase the property's livestock carrying capacity will have a much better long-term payoff in terms of market value.

Any New Mexico rancher can evaluate the market value of their own ranch free of charge by going to http://ranval.nmsu.edu, and downloading a spreadsheet program. "This really won't replace an on-site appraisal by a professional, but it will certainly give you a ballpark estimate of what the ranch is worth," Torell said.