Kris Sundeen, who has worked in local real estate for more than a decade, clearly remembers the day he realized the market was about to explode.
It was early last summer and he'd just gotten a call from someone with 40 acres in rural Humboldt who was looking to sell and asked what Sundeen thought he could fetch for the property. Sundeen, who specializes in rural plots, suggested the property hit the market at $500,000.
"'No,'" Sundeen recalls the guy saying. "'I don't want anything less than $1 million.'"
Sundeen says he thought the guy was crazy but he figured it wouldn't hurt to try. He listed the property according to his client's wishes and reached out to a few people he knew were looking. In short order, he had a showing scheduled.
"The next day it was in escrow for $1 million," Sundeen says. "That was the defining moment, and the dominos fell from there. But I didn't think the prices were going to be this astronomical."
Now to be clear, this wasn't just any 40-acre parcel in rural Humboldt. It was a parcel that had a cannabis cultivation permit attached to it under the county's new commercial cannabis land use ordinance. And over the seven or so months since that sale, the value of rural parcels with such permit applications pending have skyrocketed, especially since Jan. 1, when the county's permit application period closed.
Sundeen and other real estate agents interviewed for this story estimated that a pending cannabis cultivation permit application doubles or triples the value of a rural parcel. Properties with the applications on file are currently moving like hotcakes, they say, while ones without them are hardly moving at all.
"It's hard to even give them away," says Lauren Smith, a sales associate with Ming Tree Realtors.
But for those with applications pending, it seems the sky is the limit and the market is still trying to find its ceiling.
"It used to be I'd get a call from someone saying, 'I have $100,000 and need an owner carry,'" Smith says. "Now it's $800,000 to multi-millions or you're not even in the game anymore."
Consider the case of a 200-acre property near Kneeland, a beautiful plot of land with a two-bedroom home overlooking a 6-acre lake that came with three permit applications — two to legitimize existing grows and the other for a new one. It sold for $4.64 million last month, just a few years after an assessor valued it at $437,000.
But even that's not the most extreme example of soaring prices. That designation has to go to a 500-plus acre property listing on Maple Creek Road near Korbel that boasts of two homes, a mile of Mad River frontage and 4 acres of cultivation permits pending with the county. It hit the market last month with an asking price of $11.9 million. Just eight months ago it sold for $1.7 million, according to the real estate site www.homes.com.
Some of these sellers are savvy speculators, folks who either scooped up properties when they saw the trend or filed permit applications for their properties because they thought it might boost property values. "I think everyone's kind of figuring out how they can get their cut of the green bubble that's going on in this county," says Smith.
But a filed permit application in no way guarantees a future permit and these listings should come with a hefty dose of buyer beware. After all, the Humboldt County Planning Department received a total of 2,337 permit applications. Of those, fewer than 90 have been completed, while Planning Director John H. Ford says a "large number" are "grossly incomplete." And it's a safe bet some of those are for properties that will ultimately be denied a permit, whether it's because the property is too steeply sloped, too close to a school bus stop or any of a host of other potential reasons.
Smith and Sundeen both say they tell prospective buyers to seek out consultants, attorneys, the California Department of Fish and Wildlife and county planners, and to generally do their homework.
"That's a huge disclosure item," Smith says. "Nothing's over until it's over, and issuing permits is not our line of expertise. We sell properties."
It's difficult to tell what the ultimate impact of this market boom will be but it has a variety of forestry management implications, according to California Fish and Wildlife environmental scientist Scott Bauer. At a recent California Forestry Association meeting, Bauer told those assembled that the general proliferation of grow sites across Humboldt County comes with increased fire dangers — as any increased uses of timber lands would. And, he said, the fragmentation coupled with the soaring prices make it all but impossible for larger landowners to increase their holdings.
"I don't think people are really thinking long-term," Bauer says.
Smith and Sundeen both also say they feel for those being left behind in this land bubble. Smith points to a client who has a "beautiful" stretch of land near Burr Valley with a creek and a well. She and her husband purchased the place back in the 1990s, looking to ultimately build their dream home and retire there. But the husband died unexpectedly a couple of years ago and the wife now wants to move on from the property. But she never grew marijuana and never thought to get a permit. Meanwhile, people all around her who had illegal grows in the past are seeing their property values skyrocket.
"She's being punished because she didn't break the law," Smith says.
For now, the rural market is all about those permit applications, and the allure of being one of Humboldt County's legit cannabis cultivators is sparking interest from all corners of the world. Sundeen and Smith both say they've received calls from people from all walks of life: from bankers looking to expand their investment portfolios and dispensary operators wanting to vertically integrate to people with tech money to burn and a dream of becoming a cannabis king.
And on the other sides of these transactions, mixed in with the savvy speculators, are a lot of people looking at a windfall they never expected that's coming as wholesale marijuana prices have plummeted. Sundeen says a lot of the sellers he's come across in recent months are people who have been in the cannabis cultivation industry for a long time, have become sick of it and see selling their property as a way to cash out.
"This is a way to go legitimate," he says. "It's a check from the title company, not cash buried under ground."
Thadeus Greenson is the news editor at the Journal. Reach him at 442-1400, extension 321, or email@example.com. Follow him on Twitter @thadeusgreenson.
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