Prices paid for Texas rural land posted another strong move up in the first half of 2005 compared with price levels in the first half of 2004. The weighted median price of Texas rural land rose 11 percent from the 2004 median of $1,238 per acre to $1,379 per acre. From the Piney Woods to the Hill Country to the North Central Plains, regional markets posted substantial increases in price per acre.
Markets continued to reflect strong demand from recreational buyers and investors, but farmers and ranchers also continued to participate in buying activity. Expectations of anemic returns on alternative investments undoubtedly contributed to these thriving markets. Markets in the Lubbock (LMA 3), Texarkana (LMA 30), Lake Texoma (LMA 22) and Kerrville (LMA 17) areas posted especially strong results. However, market pressures pushed up prices in most regions. The volume of sales for the first six months dropped from 4,711 in 2004 to 3,367 in 2005. This apparent decline will likely disappear as more complete reports of local sales arrive.
Unless otherwise indicated, data compare the first half of 2004 with the same period in 2005.
Statewide Trends
- Prices rose 11 percent from $1,238 per acre to $1,379 per acre.
- Except for the Permian–West (LMA 4) and Houston (LMA 28), where prices reportedly are down more than 19 percent, all areas with identifiable regionwide (statistically significant) price trends posted strong increases. After further investigation, the apparent price drops in LMA 4 and LMA 28 appear to result from statistical anomalies rather than a true trend in prices.
- The typical size of property sold dropped from 108 acres to 102.
- Investment demand continued to drive markets in the larger metro LMAs throughout Texas. Recent activity suggests investor interest in land may be increasing.
- Recreational demand continues to dominate throughout the state.
- Agents continue to report a shortage of good land for sale in most areas. The land that is available does not remain on the market. One observer noted, “If they bring me the land, I can sell it.”
- Low interest rates and a desire for a safe store of wealth continue to motivate buyers.
The following land market areas (LMAs) registered especially strong trends. The analysis explores some of the forces affecting those trends.
LMAs 3 and 6
- Higher value recreational lands to the north continue to drive prices up.
- Flat lands to the south are seeing a much slower rate of increase.
- Sales volume remains active.
LMA 9
- Rural recreation is driving this market.
- In addition, 100- to 200-acre home sites are spreading throughout the area.
- One 30,000-acre sale with subsequent multiple splits accounts for a substantial part of the increases in price and sales volume here.
LMAs 12 and 13
- A recent slowdown in 1031 exchanges has led to a slight leveling off of prices after the sizable run up earlier. However, the market should still increase 8 to 12 percent over the next year.
- Mineral right requirements associated with sales have caused a decline in sales of up to 30 percent.
- Prices here are driven primarily by agricultural buyers with some investors buying land in the southern counties nearer to Austin.
LMA 14
- The inventory of listings is slightly lower than usual.
- Rural recreation is the primary market driver.
- Recently, larger rural tracts have been split, producing 15- to 50-acre sites for use as retirement home sites.
LMAs 15 and 17
- The inventory of listings is low and available properties sell quickly.
- Prices are up substantially over this time last year.
- A lack of available recreational land is the primary cause of this increase.
LMA 26
- The market has swung back, and sales in populous Travis, Williamson and Hays counties are picking up.
- Investment opportunities are driving the purchases and increases in values.
- Heavy investments of 1031 money in Lee and Milam counties are responsible for the sizable price increase in these counties.
LMA 28
- The market is still very active, with higher prices than in second quarter 2004.
- There are two distinct market segments and buyer motivations. In the inner counties, investment and development potential drives the market. In the outer counties, rural recreational land use is the primary driver.
LMA 30
- As many as 1.5 million acres of timberland have hit the market over the past couple years. Absorption has been nearly 100 percent and has kept prices steady.
- Land has been turned over and split multiple times down to 100- to 5,000-acre parcels.
- Land purchases have been primarily for rural recreational use with an eye on future timber production.
