OFI 942: The World Is Changing And You Had Better Notice

If you are reading this you probably already know that our farm is in the Treasure Valley of Idaho, very near the capital city of Boise.  Our area is one of the areas in the United States that is experiencing rapid growth due to mass exodus from California and states with similar political climates and circumstances.  I believe that what I am seeing locally gives me a unique insight into how things are changing nationally, particularly from the standpoint of buying farm ground and making a living in rural areas.  The following is my insight on this.

I first came to the Boise, Idaho area in 1994 when I got an internship selling Ag chemicals for Zeneca Ag Products.  The Treasure Valley of Idaho was booming back then and I can still remember my boss telling me that the rise in housing prices was unsustainable because we didn’t have the jobs here to support those prices.  He believed that a lot of the homes that were being purchased were being bought by people who had come for construction jobs.  And, he believed that as soon as the construction boom ended, those people would all be out of work.

I have heard this same refrain about the Treasure Valley for the past 26 years, every time we go through another boom.  And, to some degree it has always been correct.  However, I believe that the boom we are going through right now is different.  In all of those other incidents the median housing price rose, but over time real estate appreciated at 4-5% per year in our area.  There was still a way for a young couple to get into a house.  In 2000 Autumm and I bought our first house while we were both working hourly jobs that were paying between $10 & $15 per hour.  We started with an FHA loan that only required a 3% down payment, and we got by just fine, even paying for mortgage insurance.

However, for the past five years or so we have seen the appreciation of real estate in the 10-12% range on an annual basis.  In the cheapest areas of the county the appreciation has been even larger with median housing prices almost doubling over the past five years.  This past August we had an overwhelming demand for homes here and a record low supply of homes for sale on the market.  And there is no indication that this is going to stop, and there is nothing in the economic forecast indicating that it is going to stop.

The point of all of this is that this boom is larger and more extreme than any of the other booms that we have experienced here, and it also seems to be sustainable.  As a matter of fact, considering that we cannot build houses fast enough to keep up, it seems extremely sustainable.  So, if, like my boss told me in 1994, we don’t have the wages, jobs or industry to sustain this locally, how is this possible.

This is only possible because something has changed.  People have always desired to have the lifestyle, safety and standard of living that place like Idaho offers.  However, they have always been prevented from making the move because they could not replace the salary they were earning in places like California, or they could not find work that matched their skill set and education like they could in places like California.

However, today that impediment has been removed for many, many people.  If you started looking deeper into what is going on, even before Covid, you would have found out that high paid professionals from California were moving here and either working remotely or commuting out of state. 

Years ago I met a family who had moved to Marsing, Idaho and bought their dream property with a lot of frontage on the Snake River.  They told us horror stories of gangs, drugs and shootings in the best neighborhood they could afford to live in, in Los Angeles County.  The father was a firefighter for Los Angeles City, and his supervisors allowed him to flex his schedule so that he worked 8 days on with 3 weeks off.  This allowed them the flexibility to sell that home, buy the property in Marsing and move the family out of that toxic environment.  He simply took two flights from Boise to Los Angeles per month, worked his 8 days on, sleeping at the fire station, and then flew home to be with his family for 3 weeks.

Prior to Covid I spoke with several real estate brokers and investors that I know in our valley about what we were seeing with the housing market.  They told me that they had been selling a high percentage of homes to attorneys who worked for companies such as Google and Amazon who could work remotely from Idaho and fly to the Silicon Valley of California once or twice per month.  

No matter if it was commuting or working remotely, high paid professionals were finding a way to keep their high paying jobs from the Golden State but have a much higher standard of living by living in Idaho.  But prior to February of 2020 this was a growing but not overwhelming movement.  These people were on the cutting edge of being innovative with their work situations. Working remotely like this seemed reserved for tech companies, and the rest of industry really had not embraced this.  

But then the Corona Virus showed up, and everyone was forced to embrace working remotely.  Companies who had never considered it had to jump on board immediately and figure out how to make it work later.  The Corona Virus accelerated what was already happening.

At the same time that companies were being forced into having their employees work remotely, states like California started coming out with some of the most severe restrictions in the country.  In some cases people were told that their kids would not be back in school until 2022.  These severe restrictions and school closures in California were the final straw for so many people who were already considering moving.  The ability to work remotely just made it easier.  And now, what had been unprecedented growth in the Treasure Valley has accelerated even more!

So What Does This Have To Do With Farming And Your Farm Dreams?

This is happening all over the U.S., not just in Idaho.  And it’s not just happening in urban and metro areas.  Enough of these people, either scared by the virus, sick of urban problems or just wanting to buy some land are moving into farm country.  Remember that couple with the firefighter dad that moved to Marsing?  That is farm country folks….that is not a suburb of Boise.  And for remote workers, if there is high speed internet in a rural area, it is open game to these folks making this transition.  

Let me give you some evidence that people who are fleeing states like California are not just buying houses in places like Boise, but they are buying acreages in farm country.  When Corona first hit, I thought my business was sunk.  I actually started looking at jobs.  But it turned out that the agricultural sector that supports my business did quite well and there was actually more work for me off the farm.

Off-Farm Income is supported by companies like Lacrosse Footwear, Powder River Livestock Handling Equipment, D&B Supply, Pioneer, etc.  All of them have reported increased business to me throughout this period, growth in their businesses, bringing on additional staff, and they have all signed on for more work with our business.  This means that demand for farm products like chore boots, livestock handling equipment, gardening equipment, and much, much more has increased. 

What is causing this demand to spike?  It is not all of us who were already living rural and agricultural just deciding to buy more.  It is people being driven towards self-reliance by food shortages, strict regulations in the cities and fear of the unknown who are buying acreages in rural areas and making a shift in lifestyle that requires them to purchase these types of products.  

I tell you this as direct evidence that people are actually moving to rural areas and making a decision to be self-reliant at a faster pace than we have possibly ever seen before.  And I’m trying to illustrate to you that we are in the midst of a sustainable transition that we have never seen before.  This is not going away.  There is no reason for that to happen.

Using the Treasure Valley Of Idaho as an example, we no longer need jobs that are geographically located here to sustain our rapidly increasing housing prices.  This time, these housing prices are actually sustainable regardless of the industry that is present here.  

This is going to hold true for rural areas as well.  And in places where the only competition for farmland traditionally has been other farmers that were only willing to pay a price for land that was justified by its production capability you will see a change.  Now there is going to be other buyers for this land that don’t care about its production capability.  There will be people who work remotely and make $250k per year that are pushing the prices of this land up.  

We are in a new day that has been caused by the internet.  And each time a rural community receives high speed broadband they become susceptible to this as well.  Do you think the internet is going away?  Do you think that the internet is going to get slower?  Of course not.  It is only going to advance at a faster and faster rate.  

And at the same time that the Secretary of Ag is promising high speed broadband to rural communities, and at the same time the fiber is being laid in trenches one mile at a time, Elon Musk is putting a constellation of satellites into orbit so that the entire world can have high speed internet with no fiber in the ground at all.  

Just do a google search for Starlink and read all about it. And do a search for when you can see the constellation in the sky.  Several of the satellites are already up there and they travel in unison.  If you find out when to look, you can see them.  Plenty of people have already.  

So, the change was already coming but it was moving at a pace set by the demands of the pre-Covid world.  Now that Covid is here, we have reached a tipping point.  This has sped the pace way up.  This is going to change the cost of land and homes forever, in all parts of the U.S.  

You Need To Accept This New Normal And Start Preparing For It Now

There is a great line from Cormac McCarthy’s book, “No Country For Old Men”.  It goes, “you can’t stop what’s coming, it ain’t all waitin on you, that’s vanity.”  

You can’t stop what’s coming.  So you might as well start adjusting right now.  

Remote workers from the cities are not going to invade every rural community in the U.S.  But they are going to move into enough rural communities and purchase enough acreage that all of the pieces on the board are going to have to shift.  This will spread out throughout the entire United States and have ripple effects everywhere.

I know a family of farmers in Kuna that are being forced out of farming here.  They have been leasing a lot of their farm ground for years, which is a very valid business model for a lot of production farmers.  A very large percentage of that land is now being sold to developers because of the sustainable boom we are experiencing.  

They have told me that they are looking at moving to a community to our north called Emmett, Idaho to buy farm ground so they can keep farming.  And one of them told me that if that didn’t work out they were looking at moving to Alabama to buy farm ground so they could keep farming.  When these farmers move to one of these two places to buy a farm so they can keep going, that will be one more buyer for the available ground in that area.  Buyers represent demand, and one more buyer represents higher demand.  Higher demand for a fixed supply of land will drive up prices.  

I just interviewed a guest from Interior, South Dakota.  I don’t suspect that a lot of professionals who can work remotely will be moving there.  But as those remote workers push the prices of farm ground up in areas like Kuna, other farmers and ranchers who are forced to move, might choose Interior.  If there are more buyers in the market for available ground in Interior, they will feel the impact of this even though no remote workers are moving there.  So, as things get shifted around, prices will go up everywhere.  This is going to make it harder for you to get your first farm.  

Optimism Not Pessimism

At first glance, this might sound pretty negative to you.  However, this doesn’t have to be all bad.  We talk about using entrepreneurship to fund our farming lifestyles on this show.  This has the possibility of creating new entrepreneurial opportunities.  The remote workers moving to rural areas are still going to want some of the amenities they were used to in the cities.  Someone is going to have to represent them in their search for land or the right community to move to.  Somebody is going to have to build their house and somebody is going to have to build their fences.  

The whole point of this episode is to tell you that I think that most people are missing what is really going on right now.  If you see this shifting of population as merely a phase, I think you are wrong.  The traditional limitations that stopped people from living wherever they wanted to are disappearing.  At the same time the motivation for people to get out of cities and subdivisions has sky rocketed and is pushing the pace of this transition even faster.  

If you think we will return to pre-Covid norms after this pandemic is over, I think you are mistaken.  There is no reason why we would go back to normal when this ends.  There has been a pent up demand from people who want to escape places like California for a long time.  This is all just stored up energy, like a can of gasoline is stored up energy for your car.  Covid is simply the match that lit the gas on fire.  Just because the match will eventually burn out or burn up does not mean that the fire will stop.  It is blazing hot now, and people are seeing a new, safer and better way to live.  They are not going to want to go back!