Texas LAND Markets

Texas Land Markets

FIRST QUARTER 2023

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

Federal Reserve action is exacting a toll on Texas land markets with several brokers reporting deals collapsing because of higher interest rates. Although, market participants saw reductions in activity beginning in the summer of 2022 and continuing through the first quarter of 2023, active buyers continued to support higher prices. However, the frenzied level of activity seen in 2021 and the beginning of 2022 has cooled. The preliminary annualized volume reported to the Real Estate Center of 5,094 sales dropped 39 percent from 2022 levels. Final reports will ease the size of that pullback, but the final number will undoubtedly be substantially less than the 2022 total that has registered a 26 percent drop from 2021 levels. Volumes have continued to decline for six quarters. Preliminary total dollar volume at $1.8 billion dropped substantially below the 2022 first quarter total of $4 billion.

Sales reportedly took longer to close but prices continued to increase, rising to $4,566 per acre, a new record high. However, the rate of price increase declined for the fifth straight quarter to 11 percent down from a 29 percent increase in 2021 quarter four. However, the steady ebb in price growth appeared to have come to a halt as the first quarter change nearly equaled the 12 percent decline in the fourth quarter of 2022. In many areas, observers report weakening demand for ordinary properties but continued interest in higher quality lands. This focus on superior quality properties produces higher prices for observed sales, disguising weakening overall value trends.

Panhandle and South Plains

Strong investor demand for land with good water drove prices up 25 percent to a record $1,705 per acre even with a substantial drop in total acres to 65,295 down from 228,937 in 2022 first quarter. The number of sales dropped 36 percent to 379 sales. The drop in acreage drove total dollar volume down 64 percent to $111 million despite the large price increase.

Far West Texas

No reported transactions in the first quarter made it impossible to establish a reliable measure of market prices here. Observers reported no sales activity.

West Texas

Sales activity declined 36 percent to 660 sales, but prices rose a robust 20 percent to $2,398 per acre. Total acreage declined 64 percent to 109,406 acres. At $262 million, total dollar volume dropped 57 percent.

Northeast Texas

Volume declined 38 percent to 1,531 sales and prices increased 9 percent to $7,740 per acre. Despite rising prices, total dollar volume declined 44 percent to $381 million.

Gulf Coast–Brazos Bottom

Volume also dropped in this region, down 38 percent to 690 sales. Prices increased 10 percent to $9,763 per acre. Total dollar volume dropped 43 percent to $275 million.

South Texas

Sales activity south of San Antonio, fell 32 percent to 509 sales. Prices rose 16 percent to $5,743 per acre. However, total dollar volume declined 42 percent to $257 million.

Austin-Waco-Hill Country

Volume of sales dropped 45 percent as buyers shifted from urban areas to the country, with transactions falling to 1,310 sales. Prices in Central Texas topped 2021 prices by 17 percent, rising to $7,238 per acre. However, total dollar volume declined 50 percent to $484 million.

The Future

Federal Reserve Bank activity has begun to apply the brakes to land market activity. However, although the frenzied buying seen in 2022 has cooled, buyers continue to actively purchase good quality rural acreage. Combined with a continuing shortage of inventory for sale, these conditions point to higher prices.

Source Texas Real Estate Research Center