California North Coast benefits from go-rural land purchase boom
With more than 18 months to rethink life and work styles, aided by modern online technology, many Northern California residents are considering a strategic move within or out of state — some to Oregon and Washington and others as far away as Idaho, Montana, Texas and Arkansas.
These migrations to wider open spaces, some affecting the North Bay where San Francisco residents, mainly in the tech industry, are choosing to relocate to the Marin, Napa, Solano, Sonoma, Mendocino and Lake counties.
Those itching to move include wildfire victims looking for safer areas to buy or build and those who have left the state, seeking a lower cost of living, a better job or just a different lifestyle.
Longtime Windsor residents Joe Gossett, his wife and their three children recently purchased three acres with a home in rural Arkansas. Gossett grew up on his parents’ farm on Eastside Road near Healdsburg and joined the Sonoma County Sheriff’s Department. He later served as a Superior Court bailiff before retiring.
“We flew to Arkansas and stayed for a month, checking out available property and knew we could rent our present home quickly to make the move,” he said. “We’ve always wanted more land and this initial move is part of our 5-year plan that will include more acreage in the future.”
The Gossetts’ packed their belongings in a large trailer and left California in October.
Their goals also include becoming more self-sustaining by growing organic vegetables, raising livestock and enjoying the ability to have lush, green pastures and their new fishing hole in an area with a year-around water supply — and fewer government and regulatory restrictions.
Family members told the Journal they especially appreciate the fact that the Arkansas public school system allows medical exemptions from vaccine mandates. One of their teenagers is planning to enroll in the University of Arkansas and their daughter has friends in the area making the transition easier.
For the Gossetts’ three young people, having broadband access to social media and cell coverage is high on their wish list and a game-changer when it comes to staying in touch with friends in California.
Rural land sales more than double
In early September, the National Land Realty survey found a 155% increase in land sales during the first half of this year across the U.S. Through June, $678.2 million worth of land sold, compared with $265.4 million in the same period the year before.
This survey included input from more than 348 field agents in 40 states, including California.
“The largest sales increases occurred throughout the southern states and in the Pine Belt from Texas to Virginia where there is a lot of vacant land,” said Jason Walter, CEO of the Greenville, South Carolina-based real estate brokerage. He said there are other areas in the central and western states with high sales results, but not nearly as many in New England. Nationwide, the average price per rural acre is between $2,000 and $5,000.”
According to Walter, 97% of the U.S. is rural, housing 19.3% of the population. Elsewhere, some 80% of the people live on 3% of the land. He noted that the usual definition of “rural” describes land with 500 or fewer people per square mile. It can also be defined as unincorporated land versus property within incorporated municipalities.
He believes lifestyle change is the motive behind many of these moves. Other incentives include a desire to hunt, fish, boat, hike and camp in a place ideal for recreational use as well as for practicing conservation and growing vegetables. Some want enough land to have horses or to rent campsites, raise timber, as well as having plenty of space to entertain family and friends.
Walter said, “With more people retiring early, this transitional group wants to keep busy in their active years. However, most are new to rural living and are not familiar with different conditions, such as the prospect of ground perk tests, having to use bottled natural gas instead of relying on underground utilities, coping with septic systems and wells, controlling pond algae and finding resources for fencing, etc.”
Several organizations, including National Land Realty, offer support, advice and a host of related educational materials for those thinking about moving off, or nearly off, the grid.
Buyers seek turnkey homes with acreage
Nicholas Cadigan is a senior appraiser with American Ag Credit in Santa Rosa. He was the North Coast co-chair of the team researching and writing the 2021 California/Nevada Trends in Agricultural Land and Lease Values annual report.
He confirmed that given a mixed bag of land market actions over the past year and a half, property in Wine Country has become more attractive among those with deep pockets hailing from urban areas such as San Francisco and Silicon Valley within a few months following the coronavirus lockdown in March 2020.
“These were not just traditional ag land buyers looking for growth potential, but so-called lifestyle buyers searching for a turnkey home to purchase — with acreage, a view and perhaps a small vineyard,” Cadigan said. “Affordability is not a concern for this group, even in this otherwise pricey market. But now buyers in this category are armed with a newfound freedom to work remotely and maintain social distancing, which further encouraged this migration.”
He said this trend was perhaps most evident in areas near towns such as Healdsburg and Sonoma as well as throughout the Napa Valley floor and low-lying foothills.
According to Cadigan, rural land value trends are difficult to measure given the uniqueness of each submarket and how specific site characteristics can impact value. Turnkey homes are moving fast, while there is less demand for new construction, which is expensive. Many North Bay rural properties contain vineyards, which add value and can introduce additional buyers to the pool (i.e., commercial growers and wineries).
“Overall buyer interest and activity remains strong and the data shows the sheer volume of rural sales is up. These properties are typically priced at the higher end of the spectrum which, in turn, has resulted in a rise in overall median home prices.”
‘Leaving large cities in numbers we have never seen before’
Based in Solano County, Todd Renfrew is a broker-owner of California Outdoor Properties and Outdoor Properties of Nevada based in Vacaville and an accredited land consultant who has specialized in selling rural properties for 15 years.
“People have been leaving large cities in numbers we have never seen before,” Renfrew said. “They are not just moving to the suburbs, but beyond reasonable commuting distances to less populated areas. We focus on farmland, ranches and vacant properties which are gaining in popularity.”
Renfrew noted that there was a 60% increase in land sales from 2019 to 2020 for properties in Nevada and California. His firm sold 60,000 acres in both states in 2020. So far this year his firm has sold 81,000 acres in California and 41,000 acres to date in Nevada. He said 58,000 more acres are pending sale this year in California.
Tony Ford (Mila Johnson photo)
Demand for cannabis land declines
For Tony Ford, a vineyard and winery sales expert with Compass in Mendocino County, with headquarters in Healdsburg and an office in Hopland, sales have been strong and some rural land parcels have jumped in value from 200% to 300% among large parcels from 100 to 500 acres.
“It’s about shifting to a different way of life and also for investment as successful young people from the Bay Area and out of state buyers enter the market. We’ve handled 4 land acquisitions so far in 2021 between $4 and $6 million in Hopland, with one currently pending in Willits for $3.9 million. The cannabis industry has been turned off, while the wine industry, specifically grape prices, is heating up.”
When it comes to buyers seeking land for cannabis farming, he observed that demand for land has declined, with more sellers than buyers, as prices for cannabis have fallen more than 50% from $1,200 per pound to $500 per pound (if they can get it). The value of the land is directly related to the pricing of this commodity, similar to grapes.
“The drop in cannabis pricing started in July 2021 and with harvest currently in full swing, it’s not looking good,” Ford added.
Rural land is also being purchased for new vineyards as winery owners strive to plant more vines on parcels with productive wells and established water rights.
He said It’s been a tough three years for the wine business with drought, fires, smoke taint, contract and labor issues. The 2021 harvest is exceptionally light, with some estimates coming in at 50% lower than average.
“With three light grape harvests in a row due to environmental factors, our local grape industry is on the rebound. Typically, these cycles run about seven years, but smoke taint and drought turned this one around on a dime. Prior to 2021, there were very few deals north of $2 million in Mendocino County, but 2021 has been a completely different story,” according to Ford.
He said the current market is part of a transitional shift or what he called a “land grab” scenario where buyers want more acreage and a piece of countryside up north while being able to work remotely. “It’s sexy all the sudden to own land and lots of it.”
Less expensive to buy than to build
In adjacent Lake County, Bobby Dutcher in Lakeport said prices are holding steady for vineyard land, but existing local homes are more attractive financially than new ones. Construction there now costs about $400 a square foot to build a new home, but those already standing cost $250 a square foot to build originally.
“I’ve also seen activity increase among those seeking second homes,” Dutcher said. “These buyers and builders have to be prepared to get up to speed quickly on forest floor management practices, such as having a 200-foot clear area around homes for fire prevention, concrete roofing tiles, stucco siding, satellite TV dishes, backup power generators, solar panels and other necessities associated with living off, or nearly off, the grid.”
Carmen and Peter Gray are managing partners for the commercial and estate division of Elite Partners in Solano County.
Wildfires are not preventing people from wanting to buy land’
“There is a lot of land for sale in this region along with an increasing number of buyers looking for winery, vineyard and estate property,” said Carmen Gray.
She and her husband, Peter, are the managing partners of the commercial real estate and luxury estates division of Elite Partners, covering Napa, Solano, Sonoma, Lake, Marin, Contra Costa, Sacramento, Yolo and El Dorado counties. The couple is based in Suisun Valley just outside of Fairfield, with other offices in Vacaville, Petaluma and Hidden Valley Lake.
“Wildfires are not preventing people from wanting to buy land across Northern California,” Carmen Gray said. ”We continue to handle transactions involving 30, 60 and 100 acres or more. Having water is a big deal for buyers.”
Gray noted that those who own 5 acres are coming back to buy 20-acre parcels or larger sites and some keep looking down the investment road to buy 100 acres after selling their current holdings.
“It’s a trade-up, buy-up market. It takes money to farm, but normal, residential-only properties typically do not exceed 1 or 2 acres. Those buying larger estate property are also thinking about building ADUs, casitas — and even chicken coops — as they consider becoming increasingly self-sufficient,” Gray said.
She noted that many buyers also want to generate income from their new properties, such as grape crops, to ensure that their capital is working hard for them, as well as diversifying their income sources in the face of potential economic instability.
According to Gray, these buyers are busy people and prefer to find ready-made properties with knowledgeable service providers in place to handle operations for them.
The Grays are seeing what could also be called a sixth migratory trend occurring in the East Bay, as homeowners move to North Bay counties and sell their homes to those relocating from Fremont and San Jose. A related relocation trend is on the rise as people want to move near the Capital Corridor along Interstate 80, with its parallel rail line to take advantage of public transportation and lower real estate costs.
“Clients tell us they want to invest in land now and be ready to sell their current homes and buy or build a new home within three to five years or later as children leave home or when they near retirement,” she said.
Gray said some clients noticed that the Solano County’s Suisun Valley wine region has had accelerated development with high-end tasting rooms — similar to the portion of Highway 29 between Rutherford and St. Helena in Napa Valley — since the arrival of Caymus Winery a couple of years ago. These clients are snapping up estate properties and land in the area, and expansion is spilling over into neighboring Gordon Valley and the Lower Wooden Valley areas of Napa County.
She said the Suisun Valley still resembles the Napa Valley of 30 years ago, yet with modern luxury living, including the same high-quality wines that consumers expect from Napa, and with quick access to five different exits on Interstate 80.
High-speed wireless technology, is extending its reach into previously unserved areas enabling more people to live remotely, stay connected and continue to work or become part of the emerging hybrid stay at home workforce that is willing to come into the office periodically.
‘Crazy, exponential increase in demand for land’
As a California land director for Keller-Williams in Marin County, Danielle Davenport specializes in residential and commercial ag land and ranches.
“There has been a crazy, exponential increase in demand for land with skyrocketing prices, but not enough inventory to meet it,” she said. “Prices per acre have gone up 80% over the last decade. I’ve seen transactions for recreational land involving 10 acres at $165,000 per acre. At the same time, some ranch owners are selling out or planning to move to greener pastures.
She said 25% of U.S. farmland sales has gone to China — with 18 percentage points of that in California.
“Five states have passed legislation forbidding non-U.S. citizens from buying agricultural land. California has not,” Davenport said. “Residential land prices are also increasing sharply. For prospective land buyers in California, a key issue is having enough water.
Home sites sell for $250 to $1 million an acre
“Some land purchasers say they are preparing for the worst, and want to buy now as a hedge against inflation. They crave more privacy, should the national economy take a steep dive, and also want to have enough property to grow their own food,” said Kevin McDonald with Sotheby’s International Realty based in Sonoma serving communities in Hopland, Ukiah, Coastal Mendocino, Geyserville, Healdsburg, Calistoga, St. Helena and Anderson Valley.
“Average land prices for 1 acre, suitable for building, can range from $250 to $1 million per acre, with surplus acreage values experiencing appreciation due to aggressive sales over the past two years,” McDonald said. He sees a pattern among those in the technology sector who have come into money and do not wish to spend it in an urban area. He says some of those in this group have lacked exposure to rural living due to the demand of their tech careers to be located in urban areas.
However, today they are being drawn to rural living and its health benefits now that they have the means to acquire and enjoy it.
McDonald noted that 2021 land sales so far are 25% above the 2020 level, as prospective buyers waited for the COVID crisis to bottom out and the economy to start moving into positive territory.
Estate buyers are also looking at Sonoma’s west county area when thinking about second homes. He said overall ag land prices have been mixed to flat but are beginning to improve and strengthen now.
“I’ve seen an uptick in land sales triggered by the pandemic with more market strength than two years ago,” McDonald said. “However, new property buyers must be prepared for higher building costs due to supply chain delays and material price increases.”
Originally published on the North Bay Business Journal and can be seen here