How We Track Small Land Tracts in Texas

When people think about Texas rural land, the image that comes to mind is often thousands of acres of pasture, ranches, or farmland. But today, the “typical” land transaction looks different. 

Once a niche part of the market, small parcels are now front and center. The Texas Real Estate Research Center (TRERC) small land analysis indicates that what used to make up just 20 percent of rural land sales by tract size now accounts for nearly half of all transactions in the state. 

At TRERC, we’ve spent years modeling dynamics of rural land markets. Our earlier research on large land tracts showed that these markets move much like other investment markets, driven less by farm income and more by broad economic forces like Texas’ total personal income, interest rates, and oil prices. In other words, rural land isn’t simply about crops, cattle, or soil. It’s about a bigger economics picture. 

That raises an obvious next question: What about small land? By “small” we’re not talking about backyards or urban lots. At TRERC, we define small land sales as a low quintile of the quantity of sales in each region (see data user guide for details). This matters because small parcels serve a very different market. Buyers might be families looking for a few acres to build on, investors seeking flexible holdings, or recreational buyers who want weekend getaways. As demand for rural living grows around Texas’ major population areas, these smaller tracts are changing the landscape of the market. 

Our research on large land sales showed that prices and sales volumes followed the ups and downs of the broader economy, not the traditional agricultural factors people assumed. Instead of being tied closely to farm income, rural land values were shaped by: 

• Texas total personal income: A proxy for economic growth and purchasing power 

• The Federal Funds Rate: Influences borrowing costs and investment flows 

• Oil prices: A key source of uncertainty, especially in Texas 

When applying this thinking to small parcels, we face both opportunities and challenges. On the one hand, the same broad economic forces are still important. But on the other hand, small land buyers aren’t usually farmers or ranchers. Their motivations often have little to do with agricultural income. That’s why, instead of looking at all sales across Texas, we prefer to focus our forecast work on regions where small land activity is not directly tied to agriculture energy markets. This gives us a “cleaner” view of what’s really driving the dynamics of small tracts: things like local population growth, household incomes, and interest rates. 

It’s also important to note that forecasting isn’t about producing one “magic number” for next year’s prices. It’s about building scenarios based on economic indicators, testing them against history, and asking what might happen under different conditions. 

For small land, our process begins with historical data, identifying patterns in how small sales have evolved. We then incorporate economic indicators. Our starting point is the same three that proved useful in the large land model: Texas’ total personal income, interest rates, and oil prices. Of course, given the differences between the large and small land markets, it’s important to remain flexible. Depending on what the results show, we may also test additional indicators or adjust how variables are expressed and structured within the model to better capture the unique dynamics of small tract sales. Equally important is the way we test the model once it is built. Beyond baseline forecasts, we also conduct different scenario analysis, adjusting for stronger or weaker economic conditions. 

As we refine our models, we may continue sharing insights into what these trends might mean for land participants across Texas. 

Views expressed on The 338 are those of the authors and do not imply endorsement by the Texas Real Estate Research Center, Division of Research, or Texas A&M University.