For many, Montana has been perceived as a place where dreams could be fulfilled and life could be lived in a simple fashion. But today, those dreams are clashing with the reality that is sending the cost of some Montana real estate sky high.
That reality lies in the discovery of the state's attributes by out- of-state investors who are purchasing large tracts of land with high recreation value. Celebrities such as Ted Turner, Jim Nabors and Liz Claiborne have received the most attention as new landowners, but other, less prominent investors are also grabbing up large chunks of Montana.
A study by Bozeman appraiser N. Clark Wheeler shows that in the most active areas, Park, Gallatin, Madison and Beaverhead counties, over a half million acres have been sold over the past four years. Of that, 82 percent was sold to out-of-state buyers. "While most of the attention is focused on celebrities, many extremely wealthy business people are acquiring large tracts of land. For them, price is not a factor—location is," Wheeler says.
The problem lies in the effect these purchases have had on the surrounding properties owned for years by farmers and ranchers. The demand by out-of-state buyers with ready cash has inflated the value of all the property in an area, leaving some local owners in a bind. Owners who traditionally would sell or bequeath property to their children are finding that increased valuation of the property has created gift and capital gains taxes that make the cost of transferring the land prohibitive.
Another concern of some Montanans is the growing trend by investors to purchase large tracts of existing ranchland and then subdivide it into smaller parcels. Fueled by the publicity surrounding celebrity purchases, developers are creating ranchettes, small acreages that still maintain the feel of the larger spreads. Since Montana zoning laws call for no review of land parcels over 20 acres, developers are free to use the land as they wish. Additionally, as large acreages are subdivided, traditional land usage is often changed; pasture and grazing land is put out of production and hunting land is posted with "No Trespassing" signs.
For the most part, out-of-state buyers have focused on the areas between Big Timber and Bozeman or between Missoula and Whitefish, where land values have increased rapidly. Some have gone up as much as 50 percent to 100 percent over the past few years, but the overall effect on the state has been minor. "While many of these pockets exist, the overall rate of increase across the state has been about the same as the rate of inflation—3 percent to 4 percent per year," says Myles Watts, Montana State University agricultural economics professor.
Although some Montanans view the new landowners with suspicion, many others agree that an influx of new capital can only help. And much of the new capital derives from greater emphasis placed on recreation, viewed as a viable replacement for the declining timber industry in the western part of Montana.
So what's in store for Montana's future? "With 55.6 million acres of agricultural land and the average age of landowners at 57 years old, there's going to be lots of land changing hands in the near future," says Rock Ringling, lands director for the Montana Land Reliance. And Wheeler insists, "It's all cyclical; western Montana sellers who made a good profit from the sale of their land are now buying eastern Montana ranches that typically cost less. And we're also starting to see some interest by potential land buyers from Europe."
—Dean Davis
