Texas Land Market Developments — 2014

2014 Land Prices

Overall Texas land markets posted strong price increases in 2014. Prices across most of the state continued to rise at rates similar to trends in the heydays of 2004–05. In contrast to this strong price appreciation, prices in the Far West Texas and West Texas regions retreated following strong price appreciation in 2013. Overall statewide land prices increased 9 percent above 2013 prices.

The 2014 statewide price of $2,354 per acre was significantly higher than the 2013 year-end price of $2,160.

The real or inflation-adjusted price of $418 per acre in 1966 dollars eclipsed the 2013 record level of $390 per acre by 7 percent. Nominal prices shown in Figure 1 and Table 1 reflect the actual prices paid while real prices represent those nominal prices adjusted for inflation to 1966 dollars.

Texas Tract Size

Small-sized transactions continued to reduce overall market size as the 2014 median of 118 acres fell just short of the 2013 size of 120 acres (Figure 2). That size remains well below the 160-acre norm, suggesting that the number of reported large property sales remains depressed compared with markets in prior years.

Texas Volume of Sales

The 4,546 sales reported for 2014 exceeds volumes posted in the 1990s and marks a substantial improvement over 2008–12 reported sales (Figure 3).

Although observers on the ground report recent activity in markets for larger properties, the lack of reported sales of large tracts seems to be evidenced in Figure 4, which shows the 2014 year end totals at 1,446,827, exceeding the 2013 total by 82,351. This 6 percent expansion suggests a recovery of rural land markets compared with conditions observed from 2009 through 2012.

Regional Land Markets

On the mend since the pull-back in 2009, regional price trends shifted into high gear across most of Texas in 2014 with price increases dominating in the Panhandle and High Plains (Region 1 in the map above) and Regions 4 – 7. Far West Texas (Region 2) and West Texas (Region 3) saw prices weaken slightly. However, those areas had seen remarkably strong price increases in 2013. As the markets posted these strong results, fourth quarter 2014 saw retreating commodity prices, causing some farmland investors to pause in their four-year-old frenzied quest to buy land. Recreational purchasers supported by energy related incomes also became cautious as oil prices plummeted

Region 1 — Panhandle and South Plains

Driven by the frenzied scramble to acquire farmland investments, buyers pushed prices higher across the board early in the year. However, as commodity prices drifted lower toward the end of the year, evidence of some cooling emerged, settling the region-wide price at $1,180 per acre in 2014, up strongly from the 2013 price of $1,076 per acre (Figure and Table).

Region 2 — Far West Texas

The vast area of Region 2 yields few reported sales ensuring sizable swings in price from one year to another. In 2014, reported prices fell to $448 per acre for a 22 percent decline from the $572 per acre price in 2013 but well above $374 per acre in 2012 (Figure and Table).

Region 3 — West Texas

After a steamy 17 percent rise in 2013 to $1,266 per acre, 2014 West Texas regional markets took a breather, settling at $1,239 per acre, about 2 percent down. See the chart and table for Region 3 for added details.

Region 4 — Northeast Texas

The recession hit Dallas – Fort Worth especially hard so this region struggled to sustain rising land prices from 2009 through 2011. However, prices moved strongly up in 2014 to $3,186 per acre, more than 12 percent higher than the 2013 price of $2,838 per acre. This improving market situation reflected returning prosperity in the urban areas dominating the region. See the chart and table for Region 4 for added details.

Region 5 — Gulf Coast – Brazos Bottom

After a rousing 17 percent jump to $4,875 per acre in 2013, the robust growth in Houston contributed to another strong performance in 2014. Prices rose nearly 10 percent to settle at $5,346 per acre. See the chart and table for Region 5 for added details.

Region 6 — South Texas

The Eagle Ford Shale play supported strong price growth in this region. The 2014 price reached $3,427, nearly 17 percent higher than the 2013 price of $2,941 per acre. The economic activity surrounding development of the Eagle Ford drove prices strongly higher in this region. See the chart and table for Region 6 for added details.

Region 7 — Austin-Waco-Hill Country

Buyers in this region continued to bid up land prices producing a strong 9 percent price increase in 2014 to $3,238 per acre. The continuing recovery in urban areas as well as prosperity based in the Eagle Ford Shale in south Texas fueled demand in this market. See the chart and table for Region 7 for added details.

Future Trends

Texas land markets have extended the strong uptick in prices begun in 2013, posting price increases reminiscent of the 2004-06 market. Pent-up demand has finally begun to push prices higher; however, the small median size of transactions suggests that buyers of mid- to large-sized properties are still outnumbered by small tract buyers. Economic activity in the fourth quarter threatened to derail increasing prices and sales activity as retreating oil prices coupled with falling prices for agricultural commodities have introduced a new level of uncertainty. Anecdotal reports from the field suggest that activity in recreational markets dependent on energy markets have frozen in place. Further, brokers report accumulating inventories of cropland listings as potential investors’ appetites for farmland has apparently cooled off. Cooling activity in the oil patch suggests that future Texas markets may see some pull-back in demand. Offsetting these developments, funds from various sources seem poised to flow into the market for large properties. These factors suggest a muddled picture in the future.