Texas Land Markets Find Another Gear

STORY BY CHARLES E. GILLILAND, PH.D. RESEARCH ECONOMIST | REAL ESTATE CENTER | TEXAS A&M UNIVERSITY

Texas Rural Land Prices 2010—2019

Changes in Texas Rural Land Prices 2010—2019

SOURCE: REAL ESTATE CENTER, TEXAS A&M UNIVERSITY

Continued prosperity in the overall economy boosted Texas land prices up 6.8 percent (year-over-year) to $2,967 per acre in the fourth quarter of 2019. Demand for recreational and investment properties remained strong although independent oil operators remained missing among the group of current buyers. Industrial uses did impact some markets as landowners found it profitable to sell water for fracking oil wells, especially in the Permian Basin. The typical size dropped 19.7 percent to 1,312 acres, indicating more small properties moved in the 2019 market than in 2018. The 5,797 total sales fell 6.4 percent short of the 2018 volume, hinting at a possible weakening of demand given current price levels. However, the $1.4 billion in total dollar volume represented an 8.0 percent increase over 2018 totals. Overall, Texas statewide land markets maintained a vigorous level of activity with positive price trends.

Positive price conditions prevailed in all regions. Even Far West Texas, returning to a more normal market after the frenzied buying of sand mine properties, managed to post a small increase. Also, South Texas, after languishing for four full quarters, returned to the positive price growth column. Local pressures appeared in the Panhandle and South Plains as development activity in Lubbock and Amarillo fueled land buying in surrounding counties.

As the year opens, the economy seems strong with low unemployment and positive sentiments prevailing everywhere. General prosperity spells good times for land market participants. Still, troubling developments have emerged to threaten this rosy tableau. Specifically, the growing coronavirus threatens international travel and trade. No one really knows how it will play out, but it has taken a toll on oil prices as the groundhog looks for his shadow. Markets seem to be pricing in the threat of a significant decline in economic activity that will torpedo oil markets. Currently, the threat has created uncertainty. Only time will tell how this threat will work out.