The New Gold Rush in Washington State is Farm Land
Prices for high-quality farmland across the State of Washington are up 47% in the last 4 years, mirroring similar increases in home prices and rents.
Many people know about home prices and rents soaring across the Puget Sound region and Washington State, but they might be surprised at the latest type of property to get swept up in the state’s real-estate wave: Farms.
The average sale price of high-quality Washington farmland has increased 25% in the last year, and is up 47% in the last 4 years, according to new data from Farmers National Company.
The current average price of $12,500/acre is the highest among 18 states tracked in the report, mostly in a central swath from Minnesota to Texas, up from 4th-highest a year ago.
Washington was the only state surveyed to see prices rise in the past year.
How much land Washington’s 10 most valuable crops take up, as follows:
- Apples: 148,000 acres
- Potatoes: 170,000 acres
- Wheat: 2.215-M acres
- Hay & Haylage: 840,000 acres
- Cherries: 37,100 acres
- Grapes: 70,000 acres
- Hops: 32,158 acres
- Pears: 20,800 acres
- Onions: 21,900 acres
- Blueberries: 11,000 acres
City folk might not think much about farmland, but it is a big deal across Washington. The state has 14.7-M acres of farms, the size of about 270 Seattles. And costs for farmers can factor into how much you pay for that Honeycrisp apple at the grocery store, the Summer squash at the farmers market or a local Cabernet at the tasting room.
At the core of the issue, much like the rest of the real-estate market, is the lack of available quality properties.
Just like cities are not building enough housing to meet demand, experts say the finite nature of farmland makes those top-tier farm properties, in locations with sufficient rain, irrigation systems and water rights, an increasingly valuable resource as more land gets developed. The state has lost more than a million acres of farmland over a 15-year span.
“You have a shrinking farmland base and no way to replace it. Once you do that sort of thing with any commodity, the prices go right through the roof,” said Wade Bennett, the owner of Rockridge Orchards in Enumclaw, which grows a variety of produce and brews ciders.
“It’s a problem. Quite frankly, I don’t know how any young farming group starting out could afford farmland on the west side” of the mountains.
It’s happening east of the mountains, as well. Tom Davis, director of government relations at the Washington Farm Bureau, said some developers have been paying a premium to buy up agricultural land and convert it to strip malls or residential tracts, while others are scooping up huge swaths of rural land for vacation homes.
“The folks in the tech industry and others who have cash who go into the farm country and buy land to put their McMansions up — if zoning allows, it’s absolutely happening,” Mr. Davis said.
He also points to a rise in some crop prices over the last few years, creating a “glut of cash” for some farmers to expand operations.
Flo Sayre, a Washington real-estate broker for Farmers National, said she has also seen an increase in investors buying farmland.
Rebecca Sadinsky, who shops for farmland to protect from development as executive director of the PCC Farmland Trust, said investors, including some from outside the country are eyeing agricultural land as they “look for a place to hold dollars” or plan future developments. “The prices have been going up for a while,” she said.
One other comparison with residential real estate to watch out for: those Californians coming up to buy property. With the Golden State’s drought taking a toll on farmers there, they’ve bought up farms in Oregon, and Washington could be next, Ms. Sadinsky said.
Unlike statistics on residential real estate, those on farm values are harder to come by, and there isn’t as much of a consensus over why agricultural land prices are rising, or where they could be headed.
But everyone seems to agree the prices are trending upward.
The Farmers National survey looks only at high-quality farms, but the trend of rising prices holds true for all agricultural lands. The latest U.S. Department of Agriculture report, which is a year old, says all Washington farm real estate rose 8 percent in 2015, the fifth-most among all states, and more than triple the national average.
Washington’s 36,000 farms sell more than $9-B in goods each year, and the state is one of the nation’s top growers of fruits and vegetables.
The state is most known for its $2.4-B-a-year apple business, the biggest in the country.
Washington has become a force in the wine world, as well.
The rising farmland prices do match up with the rest of the state’s real-estate industry, although there may not be much of a correlation.
Washington is now among the fastest-growing states in the nation for rising home prices and rents, and that includes more rural parts of the state where farms are more common.
The change has been no small potatoes for farmers.
The market for and size of farms varies dramatically in different parts of the state, generally speaking, using the average farm size of 408 acres and the average costs in the Farmers National report, the typical property in Washington would now cost about $5.1-M, up from roughly $3.5-M in Y 2012.
Next on the list among the states served by Farmers National is Illinois at $11,000 per acre, Iowa ($10,500) and Nebraska ($10,000).
By Mike Rosenberg
Paul Ebeling, Editor