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May 28, 2024

Texas Land Market Latest Developments, First Quarter 2024

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.

2268-hero
By
Charles E. Gilliland
,
Colton Dwyer
,
Lynn D. Krebs
,and
Tian Su

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; data on Texas’ Land Market Areas; and data for Louisiana, Mississippi, and Alabama, go to recenter.tamu.edu/data/rural-land. The link will also direct you 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.

Annual sales volume slipped 34.7 percent year-over-year (YOY) to 3,573 in 1Q2024. While these numbers are similar to those reported last quarter, the YOY decline is not as drastic. Looking at quarter-only totals, the drop is also not as severe. The number of sales slid from 942 in 1Q2023 to 816 in 1Q2024, down 13 percent, and the first quarter number may yet be revised higher. Nonetheless, the continued cooldown in sales is obvious. Annualized sales volume has declined ten consecutive quarters to levels not seen since 2013.

Even while sales volumes are down, prices rose at a pace slightly lower than last quarter and, for context, on par with the annual rates of increase in 2016 and 2017. Based on current data, median price rose 3.7 percent to $4,688 through first quarter 2024. The real (deflated) price per acre rose a mere 1.1 percent.  

The typical size retracted from the same quarter a year ago, down by 24.8 percent to 1,186 acres. This was down from last quarter’s typical size of 1,301. Region 2 (Far West Texas), where size was down 28.3 percent, has 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. Nonetheless, size was down in every region except Region 1 (Panhandle and South Plains). 

Total acres sold statewide was down 43 percent at 246,950 acres. Every region saw a decline in total acres sold. Region 7 declined the least at 37.4 percent while Region 6 saw the steepest decline at 59.6 percent. Despite this, Region 6 saw a hefty 10.8 percent increase in median price. Statewide total dollar volume, at $1.16 billion, declined by 40.9 percent over the prior annualized total.

The rate of price increase has slowed to below 4 percent even though the typical size statewide fell nearly 25 percent. Though the statewide price did increase YOY, it was flat compared to the previous quarter. Additionally, price change results were mixed across the regions, with prices down from a quarter percent to nearly 5 percent in four of the seven regions. These results show market activity has fallen below normal levels and that price growth is weakening and appears to be turning negative. 

The separate report Trends in Large Property Rural Land Markets Through 1st Quarter 2023-2024, comparing sales of 1Q2023 to 1Q2024 across the 33 land market areas (LMAs), indicates an even more mixed bag of gains and losses in prices statewide with the quarterly median flat YOY. This report is a year-to-year comparison of year-to-date numbers. There were 16 LMAs with negative and 14 with positive price changes. Only two of the negative price changes and none of the positive price changes indicate a statistically verifiable trend, which is not uncommon for first-quarter statistics. The typical size overall was down 2 percent, YOY, to 122 acres.

Summary and Outlook

Through 2023, the key themes were rapidly declining sales activity with moderating rates of price growth. The byword for 1Q2024 is “mixed,” at least regarding prices, and rates of decline in sales volumes seem to be moderating. Texas is seeing mixed directions in price changes among the seven regions. Two of Texas’ regions with the best price growth (Northeast and South) saw continued declines in quarterly sales volumes, while the two regions with the most negative price changes (West and Gulf Coast & Brazos Bottom) saw stabilization in sales volumes (albeit at lower levels) over the past three quarters.  

Tighter financial conditions and uncertainty about future economic and financial conditions continued to subdue activity in the Texas District rural land markets through 1Q2024. Other contributing factors include constrained liquidity, declining personal net savings, domestic political uncertainty, and, potentially, geopolitical risks. The Russia/Ukraine war still drags on with no resolution in sight, and Middle East tensions remain high—two factors that complicate energy, shipping, and global trade. Meanwhile, the Federal Reserve continues to hold pat on their rate and is widely expected to maintain the current funds rate through 2Q2024 and possibly longer. Few expect the Fed to cut rates more than two or three times this year, if at all, as inflation remains above 3 percent, and may be headed higher in the near term. A key driver is unprecedented government spending, which has in part stimulated consumer spending and propped up select sectors of the economy. Government and consumer debt levels, including credit card debt, continue to rise, while aggregate personal savings is now well below 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 not seeing widespread capitulation; however, reductions in listed prices are becoming more common and more significant. Uncertainty in capital markets, specifically interest rate changes and available capital, as well as inflation, seem to be hovering over investment activity like gathering clouds. Our latest forecast model for Texas indicates statewide price per acre will likely decline in the next quarter or two and continue to gradually decline through 2025. The indicated 2024 year-end median price is predicted to be 2 to 3 percent below the current level and down 10 percent by the end of 2025. However, the same forecast predicts total acres sold should reach a floor this quarter or next and then begin to gradually rise through 2025 and beyond. Specifically, the model predicts total acres sold to rise by 5 percent by the end of 2025. Of course, outcomes will vary by region. 

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To read the report in its entirety (including maps, figures, and tables for each Texas region), click Download PDF.

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