High-end Property Still in Demand

High-end Property Still in Demand

FOURTH QUARTER 2022

REPORT BY CHARLES E. GILLILAND, PH.D. Research Economist, Texas Real Estate Research Center at Texas A&M University

Texas markets continued to cool in the fourth quarter as rising Fed Funds rates began to inspire significant rises in mortgage rates that drove up the cost of borrowing. Consequently, the 6,677 transactions reported to the Texas Real Estate Research Center throughout 2022 registered a 26 percent drop from 2021 levels. The 952 fourth quarter sales total recorded the lowest one-quarter volume since the fourth quarter of 2014. Volumes have declined now for three straight quarters. Inventories of properties for sale have continued to rise and marketing times have risen in some markets. Total dollar volume at $3.2 billion declined 4 percent despite rising prices.

Prices settled at $4,446 per acre, a new record high. However, the rate of price increase declined throughout the entire year from 27 percent in the first quarter to 12 percent in the fourth. Rising prices accompanied by volume declines have traditionally signaled a fundamental change in the market environment. These developments suggest a weakening of demand pressures as buyers’ attention shifts away from lesser quality lands. Thus, overall typical prices rise as transactions increasingly focus on superior quality properties. This change in market composition disguises weakening price trends as markets post higher average prices. Even with declining volumes of transactions observed prices remain at historically high levels and activity still exceeds pre-pandemic volumes.

Panhandle and South Plains

Prices rose 16 percent during the fourth quarter to $1,527 per acre and total acres moved up 16 percent to 171,924 acres. The number of sales dropped 13 percent to 510 sales. Total dollar volume was up 31 percent to $263 million.

Far West Texas

Activity remained sparse with only 23 reported sales. Total acreage remained nearly steady, declining 2 percent to 38,233 acres. Prices plummeted 74 percent to $474 per acre as oil industry related transactions dried up. Few sales reported in this region make it difficult to establish a reliable measure of market conditions here.

West Texas

Sales activity declined 22 percent to 879 sales, but prices rose 15 percent to $2,231 per acre. Total acreage inched up 10 percent to 252,510 acres. At $563 million, total dollar volume increased 26 percent.

Northeast Texas

Volume declined 25 percent to 2,019 sales and prices increasing 12 percent to $7,527 per acre. However, total acreage declined 37 percent to 65,627 acres. Despite rising prices, total dollar volume declined 30 percent to $494 million.

Gulf Coast–Brazos Bottom

Volume also dropped in this region, down 24 percent to 879 sales. In addition, total acres dropped 31 percent to 37,326 acres. Prices increased 14 percent to $9,546 per acre. Total dollar volume dropped 21 percent to $356 million.

South Texas

Sales activity flagged in the region south of San Antonio, falling 24 percent to 626 sales. Acreage dropped 43 percent to 55,926 acres. Prices rose 23 percent to $5,743 per acre. However, total dollar volume declined 31 percent to $321 million.

Austin-Waco-Hill Country

Prices in central Texas topped 2021 prices by 24 percent, rising to $7,127 per acre. However, total dollar volume declined 27 percent to $700 million. Total acres sold dropped 41 percent to 98,192 acres.

The Future

Buyers continue to actively purchase rural acreage. However, the explosive activity that roiled rural land markets during the pandemic has slowed to more sedate volumes of sales in 2022. Markets await developments resulting from actions by the Federal Reserve Bank’s continuing increases in interest rates.

Source Texas Real Estate Research Center