Texas Land Market Latest Developments, Second Quarter 2024

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About this Report

The Texas Land Market Latest Developments report contains an analysis of Texas land markets. The reported sales consist of a sample of verified transactions through first quarter 2024. The report does not include all Texas land sales. The statistics reflect a mixture of land uses and conditions and represent the market for large rural land tracts (the minimum land size is region-specific due to the varied tract sizes sold in each region). Statistics in the report reflect general trends without regard to land use or type. The analysis reports quarterly, annualized changes using moving averages as they generally minimize noisy, short-term fluctuations and provide a long-term indication of market trends. Reported values are based on median prices because they are the most stable representation of market conditions.

Users should regard the statistics presented here as indicators of past market conditions providing a general guide to land market trends. The reported data do not represent prices or values of any particular farm or ranch. Users should not consider the reported statistics as a substitute for an appraisal or market study of current local sales regarding the value of any particular farm or ranch.

For historical data on Texas’ Land Market Areas and data for Louisiana, Mississippi, and Alabama, go to trerc.tamu.edu/rural-land. This page also includes a link to Texas Rural Land Value Trends, a regional analysis of Texas markets by the Texas Chapter of the American Society of Farm Managers and Rural Appraisers.

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Texas

Statewide median prices continued to rise through the second quarter and increased 3.7 percent year over year (YOY) to $4,702, the first reading over $4,700. The real (deflated) price per acre rose 1.1 percent YOY. The five-year compound annual growth rate (CAGR) was nearly constant around 10.5 percent across 2023. It slipped to 10.3 percent in 1Q2024 and currently sits at 9.9 percent through 2Q2024.

Annual sales fell 20.5 percent YOY to 3,491 in 2Q2024. The percentage drop in quarter-only sales volume was almost identical to the annualized total. The number of sales in 2Q2024 was 824, a 20.9 percent drop from 2Q2023 (1,041 sales), but the 2Q2024 number may yet be revised higher. The continued cooldown in sales is obvious, albeit at a more modest pace than last year.

The typical size retracted from the same quarter a year ago, down by 22.1 percent to 1,165 acres. This was down slightly from last quarter’s typical size of 1,186. Region 2 (Far West Texas), where size was down 26.4 percent, had a large impact on this number; though it accounts for a tiny proportion of the sales, it covers a large proportion of the state’s land mass. Size was up in three regions (1, 3, and 5).

Total acres sold statewide was down 23.5 percent at 262,757 acres. Every region saw a decline in total acres sold, but the decline in Region 3 was only 2.9 percent. Statewide total dollar volume, at $1.24 billion, declined by 20.7 percent over the prior annualized total. While changes over 20 percent are quite large, the YOY decline is much less drastic than what was seen from the end of 2021 through 2023.

The rate of price increase has slowed to below 4 percent in each of the last two quarters but has also held above 3 percent. While in the first quarter prices were down in four of the seven regions, this quarter prices were down in only two regions (3 and 5). These results show market activity is still below normal levels, but prices continue to show modest gains. It will be interesting to see if these prices hold up next quarter, as a continuation in low market activity is expected.

Comparing sales of 2Q2023 to 2Q2024 across the 33 Land Market Areas (LMAs), there was an even more mixed picture of gains and losses in prices statewide with the quarterly median flat YOY. There were 15 LMAs with negative price changes and 16 with positive. Only two of the negative price changes and one of the positive indicated a statistically verifiable trend. The mixture of positive and negative results with few statistically significant shifts suggests a market searching for a sustainable price trend. The typical size as an average of the LMAs was up 7 percent YOY to 127 acres.

Summary and Outlook

The key themes through 2023 were rapidly declining sales activity with moderating rates of price growth. The byword for 1Q2024 was “mixed,” at least regarding prices, and rates of decline in sales volumes seem to be moderating. This is true for 2Q2024 as well. However, prices are more mixed than last quarter, with rates of increase slowing in some regions and bouncing in others. There are mixed directions in price changes among the seven regions. Prices bounced back a bit in Region 1, slipped more in Region 3, slowed in Region 4, and turned from negative to a new high (at least temporarily) in Region 7. Two things remained the same on a YOY basis: the two regions with the best price growth (Northeast and South) saw the largest declines in quarterly sales volumes, while the two regions with negative price changes (West and Gulf Coast & Brazos Bottom) saw some of the most modest declines in sales volumes.  

On the economic front, not much changed from the first quarter. Tighter financial conditions and uncertainty about future economic and financial conditions continued to subdue activity in Texas’ rural land markets. Other contributing factors include constrained liquidity, declining personal net savings, domestic political uncertainty and growing geopolitical risks. The Russia/Ukraine war still drags on with no resolution in sight, and Middle East tensions are on the rise, complicating energy markets, shipping, and global trade. Meanwhile, the Federal Reserve continues to hold pat on their rate and through the second quarter was widely expected to maintain the current funds rate in July, which turned out to be correct. 

Since the end of the second quarter, the employment picture has turned more negative and equity markets more volatile. Few expect the Fed to cut rates more than two or three times this year, though market expectations of a September cut are practically unanimous. The market’s (and presumably the Fed’s) attention has turned more toward employment than inflation, although inflation is still a concern. A key issue is the unprecedented government spending over the past several years and the declining contribution of government and government-adjacent jobs to overall employment numbers. Additionally, consumer spending appears to be slowing, at least in some sectors. Government and consumer debt levels, including credit card debt, continue to rise, while aggregate personal savings remains low compared to pre-pandemic levels. Meanwhile, a cloud of concern hovers over commercial real estate, especially office buildings, given higher cap rates, lower occupancies, and roll risks. 

Rural land markets are holding up well under the circumstances. Activity seems to be at or near a bottom, with some regions showing slight improvement in recent quarters. The lack of statistically significant shifts can indicate that prices of some land categories are falling while others are increasing or that prices are searching for a trend. Uncertainty in capital markets, specifically potential interest rate changes and recession fears, seem to be rumbling over investment activity like gathering storm clouds. Nonetheless, savvy investors usually act before the clouds clear (picture the classic risk-reward paradigm). Some are making moves and, most likely, more are looking closely at near-term opportunities. 

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