Podcast Transcription: The State of the Union
Speakers:
Billy McOwen
Bryan Dehart
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Announcer
Hey folks, I'm Cuz Strickland and welcome to find your favorite place presented by Mossy Oak properties land and farms realty, the podcast dedicated to a life lived on the farm, in the woods or by the water. Each week we'll talk about hunting, fishing, the outdoors and land ownership throughout the Carolinas and Virginia. Our goal is to help each of you live your best life outdoors. Here's our host, Billy McOwen.
Billy McOwen
Thank you cuz. My name is Billy McOwen, I'm your host. I'm joined today by my partner in crime, Mr. Bryan DeHart. Captain, how're you doing today?
Bryan Dehart
Doing good sir. How about you?
Billy McOwen
We're back at it. Today, we're starting season four episode number one, and we're going to call this "The State of the Union." So today we're going to talk about what is going on with the land market. I think I probably should let everybody know we're in mid February 2022, coming out of a busy winter. We are just now being able get back to our regular podcast schedule. So, today we're going to talk about what's going on in the land market, land prices, interest rates, inflation, buyer perception. Bringing everybody up to speed. I've got to ask, how was fishing this last winter?
Bryan Dehart
Coming out of November, we had some cool weather, had the rut. There were some pretty deer killed. We got it to December 1, it just seemed like everything changed. It was 55 degree nights and 65 degree days, and the speckled trout were biting. So although my rifle stayed close by, I put a whole lot of fishing tackle in my truck there for about a month and end January, we still had alot of trout around and rock fishing was still pretty good in the mouth of the river.
Billy McOwen
I was talking to Andrew Walters, our broker in charge in Greenville. Andrew listed a tract of land, 20 acres in Granville County which is north of Raleigh. I think he said it was $129,000 for 20 acres. He sold it in two days, $10,000 over the asking price of $139,000. Someone we know, a good real estate agent, had the adjoining tract. 20 acres listed, guess what he had it listed for? $57,000. Wow, what kind of service do you think he was doing his seller? Whoever ends up buying that, got the deal of the century, correct? Because it was not priced properly, as evidenced by the fact.
Bryan Dehart
I saw a couple hours ago that Andrew had listed one in Duplin County and sold it in six hours.
Billy McOwen
Yes, stuff is flying off shelf. And it's part of it. I'd love to sit here and tell you, it's because we're the greatest real estate company on the planet earth. But the simple fact of the matter is, we're good at what we do. We're good at pricing, we're good at marketing, we're able to get these things turned around because these agents have figured out how to latch on to that locomotive that is our marketing machine. As such, we're able to sell these things quicker and for more money than we used to a year or two ago. I just listed two lots out there in Pasquotank County, and nothing unusual about them. A 4.85 acre lot and a 5.2 acre lot. I had them on the market one day, and I'm getting calls. Somebody saw it on our Facebook, and the next thing you know, offers are coming in. The demand is still real high, but the inventory is low enough that if you can price this thing right and get it out there, you're going to sell it in just a couple of days.
Bryan Dehart
We've had hot markets before, and this is as hot as I've probably ever seen. But the ability to disseminate or to get out in the public domain immediately, these new listings are coming in and are ready to roll between the social media stuff that we're doing, our website, all the aggregate land sites, and people are sitting around looking at the listings coming in right away. So it's happened faster than a lot of people have ever seen before.
Billy McOwen
Are you seeing more people coming into the market with 1031 exchange money than you ever have before?
Bryan Dehart
I don't know if it's ever, because it's been a constant. Over the years, there's always been commercial activity and people turning over commercial activity. But there is definitely a lot of it right now and they place it in a lot of different areas. You know, people have different tastes about their commercial investing, but it seems like maybe there's more demand in our segment right now, than what you you've been familiar with. The 10-31 money's been there all along.
Billy McOwen
I guess that's what I mean, really, because we're seeing a lot of these in heavy populated areas. I got a call today from a lady from Zebulin, you know, one of the hotter markets around. They're selling some land that they own out there, and they got a quite a chunk of change, and they're ready to take those proceeds and put it into some recreational land. Now they want to get back to the country. I had a couple of pieces that I had listed, and I've had them listed for a little while. The sellers wanted to get a certain amount of money for them, because they were nice pieces of land. Here's what I've seen happen. The markets come up to them, correct. I didn't have to go down to the market, like we used to, because the market has come up to them. I've got one tract I've had for three years on the market. Now. It's an expensive track. It's a unicorn, you know, it's one of a kind. But now we're starting to see these people. The price point that we had it at that was a little, maybe a little kooky a couple years ago, start to make sense today.
Bryan Dehart
That's situations like we talked about a little earlier with Andrew listing a piece in Granville County and selling it for $10,000 over asking price. $129,000 listed and sold for $139,000, and the next door neighbor listed at that 59,000. So those are two comps, but they're wildly different.
Billy McOwen
Oh my gosh, yes, and you're exactly right. You just hit on the million dollar question. So, what does happen with an appraiser at that point? You would like to think that most of these guys are throwing out the highs and throwing out the lows, but that "norm" is still going up. It's not the same as it was a year ago. And I guess the real answer to your question is, how would I like to be an appraiser today? I don't know that I would, I think they are really challenged.
Bryan Dehart
I think it's a challenge. And again, if you draw concentric circles around Raleigh, and you start getting further and further and further out, we're all active in those circles at different levels. But you got stuff inside of one circle at $10,000 an acre, I can throw a dart to $4,000 an acre.
Bryan Dehart
And if you go to the other side, you could throw another dart at $50,000 or $100,000.
Bryan Dehart
And you've got to keep up with that circle, because it moving everyday.
Billy McOwen
You're exactly right. I think you and I will both agree on the fact that land prices are steady climbing, they're steady going up. We had thought that maybe we were at the end, now that we're coming out of this COVID mess, that things were going to slow down and stabilize, but I don't see it. We're dealing with these guys that are part of this Black Gold farm that we're working with in Tyrrell County. These guys are heavy hitters out of the Midwest, they're looking at land prices all over the country for farmland. They're telling me that the reports that they're looking at as of today, farmland in the Midwest is still climbing. As farmland prices go up, commodities go up. It's all self supporting as it's starting to move, kind of move up in the column. Wwhat are your take on farm prices?
Bryan Dehart
Well, what I saw in 2007 - 2010, that was really the first big run up of farmland that I saw in my career. I started selling land in 2004. It was a hot market, but when we got to 2007 and 2008 and we hit that recession, all of a sudden, institutional buyers showed up in eastern North Carolina. And I was privileged to be able to spend some time with a lot of these guys and show them around our part of God's country. At the time, we put a deal together, that was the highest price that farm land had sold for in years. And that started a run in eastern North Carolina again, of institutional buyers moving into the area. When you get into economic instability, farmland prices go up. Just like commodity prices go up worldwide. People are investing in farmland at that time. I'm not talking about a farm outside of Raleigh, I'm talking about 1000 acre, 2000 acre, pure farmland tracks. They stabilize after the recession after the economic instability. When you start to get into some uncertain times again, you'll see those prices start to creep up. Right now we're seeing those prices start to creep up just a little bit, which is interesting because forecast wise and it kind of helps you see that we may be getting into more economic instability than we realize.
Billy McOwen
What we would consider to be our base customer, which is somebody looking to spend $150,000 to $250,000 on a piece of recreational land, right? Yeah. What do you think interest rates is going to do to them?
Bryan Dehart
I've heard a number of times as many as seven hikes. But they're going to be small, incremental adjustments, nothing substantial in any given time. Supposedly, it serves a purpose.
Bryan Dehart
Do you think the fact that interest rates are going to rise, is that going to drive people to be spend more cash? Are we receiving more cash buyers than we are loans?
Bryan Dehart
Both, but I'll preface that by saying what I saw was your 40 acre tract with a pond buyers with two kids and a four wheeler, two deer stands, etc. Those guys go get loans, usually. The high end recreation buyers or some of the 1031 Exchange folks, or some guys coming out of the stock market. Some of these bigger purchases actually are the cash purchases, and the $100,000 to $200,000 stuff. Maybe, you know, those those are going to the banks, the younger family type types seem to be going to the banks.
Billy McOwen
To me it's exactly the opposite of where it was four or five years ago. The big purchases were all loans and the small level guys was all cash. But now the low level ones are loans and the high level are cash. Obviously inflation is starting.
Bryan Dehart
Just a question, have you seen the Biden stickers that say "I did that" on the gas pumps? I almost rolled acrossed the parking lot when I first seen those.
Billy McOwen
We get a lot of clients who buy and then they want to build. A couple of guys that work with us are builders, like Frankie and Shannon. I'm looking over here looking at these houses and what I'm seeing, is these prices keep going up. Our brand new agent Jacob Oliver in Richmond area sells a house in two days at $90,000 over the asking price. Can you believe it? How does it make more sense to buy an existing house when it's that much of a price increase and that high? Again, even with the supply and demand on things and building materials, cost being super high. When does it swap over to be a better alternative to just buy land and build?
Bryan Dehart
It is the million dollar question. And here's a hard part of that answer. I just had a conversation with a local builder yesterday about this. What we talked about was cedar shakes. You know, cedar shakes to go on the side of these beach houses. So there's a company out of Maine or somewhere where they get all their cedar shakes from and all of a sudden they tell one of the largest builders down here on Outer Banks that they don't know if they're gonna be able to provide cedar shakes for him anymore that aren't stained. So many people out here use white cedar unstained. And because that's the look that they like on these beach houses.
Billy McOwen
Oh, yeah. After a couple years, it gets that gray patina.
Bryan Dehart
In the northeast, everybody out there uses stained cedar shakes will because of supply and demand. This company says you know what, we can't provide you unstained cedar shakes anymore, because demand so high up here. So now builders on the Outer Banks are having to deal with the fact that they don't know when they're going to get product that they need. You've been a builder before. Are you familiar with hardieplank? Well, so hardieplank had a situation where staff was diminished, supply was diminished. They were able to increase their prices, and now they have gotten comfortable with the diminished staff, and the amount of production that they're doing because of the higher prices and they've told these builders down here, sorry, we'll put you on a list. And we'll get it to you when we can. So the builders don't know how to handle the supply situation. I'm talking about one of the most reputable builders on Outer Banks is scratching his head going, "I don't know what I'm going to do for future clients, because I don't know how to tell them what's going to be available as the prices change weekly." It's like buying new and used cars right now.
Billy McOwen
I know, I hear you, we're looking at Ryan's truck. He's driving around in my old dodge 2005 truck with 356,000 miles. I'm thinking we probably ought to start thinking about looking at another truck. My brother in law says no it will go to 600,000 miles easily. So after talking to him, I changed my mind. I still went and looked at at used pickup trucks. Now you got to remember when I bought that truck, and what I paid for it. Today it's more money than I paid for it back then. That same truck with the extra miles on and everything.
Bryan Dehart
That's a good way to relate it because a lot of people been looking for vehicles, and they'll understand. There's a demand for used vehicles. And used vehicles are sometimes price higher than new ones sitting on the on the lot. Don't make sense. But that's the way it is. And it's the same way with with houses. Old houses, used houses are inflated, because of the demand when they hit the market, they're going just like that, but a new one you would think would make better sense, at some point to build new, but you're dealing with this whole supply chain issue and no telling when you would actually get it completed or what the price would be. So what he told me so here's the way we got to start building from here on it's cost plus, we'll give you an estimate today of what the materials would cost today. But when we finish it you're going to have to pay us cost plus because we have no idea what that contract is going to look like when we get finished building this house.
Billy McOwen
Kenneth just listed kind of subset of of one of these, it they call them barndominiums. So basically it's like a barn shell that gets finished out on the inside. They're steel framed, they're insulated really well, they sheet them with metal on the outside. And these things are nice man. I mean, Monica and I started looking at a couple of we were looking at land and thinking, hey, why don't we just build one of these things? Buying a piece of land, figuring out where you want your house design in the house of your dreams. It's not a three to six month deal anymore. There's the word that they call "transitional lands" out there, but that's farmland, or open land that is now being turned into these development parcels. And of course, one of our guys Doug Moore lives in Raleigh. He works on that a lot. He's part of Sean's crew now in our Raleigh Office and he's working on some of those big tracks out there near few Fuqua Raleigh suburbs, those are those $50,000 to $100,000 an acre tracks. But we've got these little communities near us like Kinston, or like Newbern, for example. Newbern is just as hot as a firecracker. And we've got some big open tracks that are like that, that we got people sniffing at for the first time and so do you think that that even though that what we just described in terms of the way these builders are acting and this unpredictable future of of supply chain, with building materials and things like that, do you think it changes the demand of housing, because there is a really limited inventory of houses available in these markets, and people want to live there. So does it make sense for builders to go and buy these transitional lands now, and go and start do these build outs and put together these little developments and subdivisions, you know, you know, I don't know, I mean, what do you think the answer to that is?
Bryan Dehart
If you're in the right spot, then you might can weather some instability a little longer. But if you're not in the right spot, and you go doing some kind of big spec build out, and you having a supply issue, and you get caught with inventory in some kind of economic downturn, you're gonna get crushed, because you can't build them fast enough. If you could build them in three months, you could sell them as fast and you wouldn't be strung out as long.
Billy McOwen
With interest rates and all this other stuff, if you do get an economic downturn and the banks change the way that they think about these things like they did in 2007-2009, then we could be looking at that. Last year, we had a 33% growth. I would have never seen that coming. We just worked hard, we put our nose down, we served our customers as best we could, but 33% is one heck of a leap. Leslie and I are looking at these numbers, we watch it close. And here we are off to the same doggone start again this year. I don't see any end in sight in this. When I'm seeing Andrew begin to sell stuff in six hours, like you mentioned earlier and those of us as soon as we get something on Facebook or on the web, and people are blowing up. Here we are, you and me are working on 1500 acres, a $7,000 an acre farmland down in Tyrrell County and we've got three of the some of the biggest buyers in the nation all over this thing at $7,000 an acre, nobody's batting an eyeball at it.
Bryan Dehart
It's inventory. Institutional guys are buying as hard as they can. I learned a long time ago, when I was putting deals in front of some of the institutional buyers, that they have big buildings in Boston, and big buildings in Chicago, full of people that are doing nothing but crunching numbers and looking at economic situations and that's what they base their decisions off of. They see things so far in advance that we don't see coming. They'll tell you stuff that's getting ready to happen two or three years down the road there will never see on our local level. And right now, when when inflation rises, economic instability, farmland prices will go up. That's just the way it's always worked. We're gonna see institutional buyers buying. An agent just closed a big piece in Pamlico County. Another agent just closed a big piece in Hyde County. We're going to sell 1,500 acres in Tyrrell County and anything else we can get our hands on, those guys will buy. So that's rolling right now.
Billy McOwen
And on the recreational front?
Bryan Dehart
I don't see any slow down. I mean, it's gonna keep rocking and rolling. It don't matter if it's 2 acres or 2000. There's somebody for all of it right now.
Billy McOwen
You know, what's interesting for me is, we talked about this the other day at our annual meeting. The buyers are different. Granddad and grandma used to say, yeah we'd like to buy this farm so we can have our kids come out with the grandkids. You know what's happening now is the kids are coming to me and saying, we want to buy this now we can have grandma and granddad come out to see our kids. It's that millennial money, you know, these young 30 somethings that are out there making a couple of large a year, wanting to have a little place to get away to and high speed internet. Working from home and it's interesting. So I want to give a shout out to a couple things. You know, here at the end of last month just a couple weeks back, we had our annual meeting at Rocky Mount. We had Chris Hawley and David Hawley come on up and visit us for that event and I just wanted to say thank you to those guys.
Bryan Dehart
Absolutely, that was great having those guys there. Tell everybody who they are.
Billy McOwen
Okay, well Chris Hawley is the president of Mossy Oak Properties. His son David is the the head of all the franchise acquisition operations. Both of those guys have been great friends of ours over the last 11 years that we've been doing business with them. I gotta tell you, it's pretty awesome to have them jump on a plane come on up to Rocky Mount North Carolina and spend two days with us. They spent a day with our leadership team and our meeting, talking about our goals and the things that we were going to accomplish this year. Then they spent an entire day with the rest of our crew as we went through our annual meeting and awards and all those types of things. So big shout out. The other the other thing I wanted to say a big shout out for, was that we started the oak tree foundation last year, which is our giving fund and it's a 501C3 that we formed to provide for some folks that are in need. The mantra for Mossy Oak is that the good that men do live long after they're gone. The good that we're doing with the oak tree foundation is pretty phenomenal in the way that we're able to help people is pretty powerful. It was special to have Chris and David come up, and they donated $2,500 to the Oak Tree Foundation. I gotta tell you, man, it was emotional for me, i'm standing up there at the front of the room bawling like a baby, and talking about all the stuff that we're doing and the people that were doing it for, it was shaking me up bad and see those guys step up to the plate like that, it really means a lot. There's there's more to our business than just selling land and making money and doing stuff like that. All the money in the world doesn't mean a thing if you're not good with it. This business is about helping other people and service; it's all about God's money,
Bryan Dehart
Relationships, which is all of that encompassed in one thing. I mean, but that's what this business is about.
Billy McOwen
It is and the relationship that we have with our Heavenly Father and the relationship that we have with other people that are less fortunate than us is certainly two of the most important relationships that we can have in our business and I'm just really grateful and very, very proud of the people that work for us and in our company. I mean, we were able to raise just shy $25,000 to give away to people in need, at the drop of a hat.
Bryan Dehart
Other than Chris and David, that's just from our agents. That wasn't outside giving, that wasn't a big no fundraising event. That was Mossy Oak Properties Land and Farms Realty agents that are giving to help others. That's huge.
Billy McOwen
It is huge, and it makes me feel really, really good about us and makes me feel good about our team and what we're doing. So, to wrap all this up, I'm going to tell you, I think the state of our union is good. I think what we're seeing is land prices still increasing. We're going to get some hiccups here along the way with some interest rates. You were talking 4 to 7, I'm hearing 4 I think those hiccups will be tiny. Inflation is definitely occurring. I feel it the most at the gas pump.
Bryan Dehart
Outer Banks Sportsmans Fellowship, which is outdoor, men's ministry that we do, next Thursday night will be 14 years. Every March, what we do for our anniversary is ribeyes. Yeah, well, we had to buy the ribeyes. Oh, talk about inflation brother, wow. 80 cut ribeyes, it was twice as much as I think we've ever paid for before. So I hope everybody enjoys those things.
Billy McOwen
Yeah, well, I'm sure they will. And congratulations, 14 years is a long time. Tell everybody real quick here before we split now that you brought it up, what's the Outer Banks Sportsman's fellowship all about?
Bryan Dehart
It was to create an atmosphere where men could get together and maybe bring their kids, boys and girls to. It's a joyous kind of atmosphere where everybody sits around talking, with a lot of laughing, a lot of smiling. It's where Christian men can get together can be men, can talk about men stuff, but can do it in a Christ like manner you know, representing him and we eat well. I've got some of the best cooks in the country when it comes to wild game and feeding large. We all eat some crazy stuff. We had bear ribs. How'd you like this bear ribs last month?
Billy McOwen
I gotta tell you, I'm a little kooky when it comes to bear meat, because I got a little thing about eating something with some claws on it. I will say this, they were off the chain. You won't hear me say this too often, so is everybody listening? I was wrong about bear meat.
Bryan Dehart
It depends on who's preparing them, and Big John is as good as there is. His bear ribs are off the chain. The other thing that we do, the other part of the vision there was to create a situation where regular guys can share testimonies or stories or the good things that God's done in their life that the guys that don't have a platform, you know, they're not NASCAR drivers, or professional coaches, preachers or whatever the regular guy is people that are walking around us every day that have great stories. Gives that opportunity to those guys to share their stories.
Billy McOwen
So we're gonna wrap this up. Captain Bryan, thank you so much for joining us. I appreciate it. We're going to try to get Season Four off to a good start here and Captain Bryan and I will be following up with this one here, with a bunch more downline to come. If you've got something that you want us to talk about or research about, then send me an email. I'd love to do this and dig into something that means something to you. So my email address bmcowen@mossyoakproperties.com. Send me an email. Let me know what you want to hear about. We'll create a podcast around it and have some fun. Alright, peace out everybody. We'll see you next week.
Transcribed by https://otter.ai
