Texas Land Market Developments: First Half 2004

Prices paid for Texas rural land jumped sharply in the first half of 2004 compared to price levels in the first half of 2003. The weighted median price of Texas rural land rose to $1,178 per acre, 8 percent higher than the 2003 median of $1,093 per acre. From the Piney Woods to San Antonio to the Canadian Breaks, regional markets posted substantial increases in price per acre.

Markets continued to reflect strong demand from recreational buyers and investors, but farmers and ranchers reportedly have joined in buying activity. Expectations of rising interest rates and anemic returns on alternative investments undoubtedly contributed to these thriving markets. Markets surrounding Dallas-Fort Worth, Waco, San Antonio and College Station posted strong results. However, price pressures ranged higher in remote regions as well.

Volume of sales dropped from 4,243 in 2003 to 3,017 in 2004. The reduced volume may indicate a shortage of acceptable properties offered for sale. However, this apparent decline may diminish as more information becomes available.

Statewide

• Prices rose 8 percent from $1,093 per acre through the first half of 2003 to $1,178 per acre through the first half of 2004. One observer said, “It is so white-hot that the market has to slow down. But I would have said that last year, and anyone who listened would have missed 20 percent appreciation.”
• Except for the Crosstimbers area where prices barely budged, all areas with identifiable regionwide (statistically significant) price trends posted strong increases.
• The typical size of property sold was virtually unchanged at a median size of 108 acres.
• Recreational demand continued to dominate markets throughout most of the state.
• Investment demand continued as a strong driver of markets throughout Texas.
• Farmers and ranchers who are willing to pay prices above historical norms have appeared in some agricultural areas.
• Even remote areas are seeing active markets with rising prices (the Rolling Plains – North and Trans-Pecos for example), indicating a shift of buyers from higher-priced regions.
• Agents report a shortage of good quality land for sale in most areas.
• 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 in the first half of 2003. The analysis explores some of the forces driving those trends.

LMA 1

• The 2003 median price per acre was down in this region, partly because of an increase in the proportion of larger properties in the 2003 market. However, 2004 sizes and prices returned to a more normal market.
• Additionally, rising milk prices have boosted demand for land to expand existing dairy farms or construct new facilities.
• Investment motives also recently have appeared with investors purchasing irrigated cropland hoping to benefit from appreciation.

LMAs 5 and 6

• Recreational buyers continue to flock to these areas in search of property. The market is flooded with buyers pursuing a limited supply of quality properties.
• Investment demand, combined with recreational demand, continues to put upward pressure on prices.

LMA 13, 14 and 15

• With increasing numbers of urban dwellers seeking retreats from pressures of city life, recreational demand for land continues to drive the market in this scenic area of Texas.
• Investment motives have also figured prominently in many purchases.
• The volume of sales may have slowed because of a shortage of properties for sale.

LMA 18

• Recreational demand and investment motives continue to dominate in this market.
• The recent start of construction on the Toyota plant has begun to influence land trades with prices near the site rising by about 20 percent.
• Substantial levels of development activity also continue to drive demand for raw land throughout this area.

LMAs 20 and 21

• As with most areas, wooded land with game populations continues to rise in price from recreational users in these two regions.
• Recently an influx of investors has also driven demand in this market.

LMA 23, 24 and 25

• The overflow of people in the Metroplex has led to an increase in demand for rural land throughout this region.
• People are moving outward from the cities in an attempt to accommodate the growing population, putting pressure on land prices.
• The recent increase in leasing for production of natural gas has also begun to put pressure on land prices in certain areas.
• Demand from investors and for 1031 Exchanges are also on the rise.

LMA 27

• The desire for rural land continues to be strong in all parts of this area for not only recreational use but residential development.
• New owners are transforming the land into high-fenced hunting properties or weekend get-away retreats from the city life, or they develop residential areas. All of these uses support high prices for the vacant land.

LMA 31

• The problems and pressures of urban living continue to fuel demand for acreage in this Piney Woods region with buyers acquiring smaller properties at substantially higher prices.
• Recently sold Louisiana Pacific acreage is being purchased by investors and flipped several times, increasing the number of sales for the region.
• Recreation is also driving prices in this region.