Little Pieces, Big Prices
Texas land prices have spiraled upward to spectacular
levels in the past
five years, leading observers
to ponder the
future of a market trading at unprecedented
markets, buyers often scramble to grab
for sale. But when uncertainty surfaces,
buyers tend to
become more cautious, focusing on topquality
figures for the first half of 2007 do not
reflect such a
shift to quality-driven, selective sales.
trends suggest that the longanticipated
market cooling may
have begun. Specifically,
the number of
reported sales in first half 2007 confirms a
slowdown in the
volume of transactions in Texas rural
While more first-half sales data volume
be revised upward, the 2007 first-half
volume of 3,769
sales dropped 31 percent from the 2006
of 5,452 sales (Figure 1). The 2007 level
roughly corresponds with the volume registered
in 2002 land
Sales price growth
rose by 15 percent, slowing from
23 percent posted in 2005 (Figure 2).
first-half price was $2,075 per acre, topping
$2,000 per acre
for the first time ever. The 2006 first-half
price was $1,811
per acre. Despite the deceleration since
2005, the 15
percent increase nearly matches the 16 percent
growth over the
entire year in 2003 and 2004.
While a noticeable
slowdown in sales volume occurred early
in 2007, market
participants and observers saw increasing
interest later in
the summer. Two forces contributed to the
activity. First, potential buyers were still searching
for land but faced
a shortage of quality properties for sale
state. Second, potential sellers were too aggressive
in marking up
asking prices. The resulting jump in asking
some buyers and caused them to delay buying
in hope of finding
more desirable options.
The real or
inflation-adjusted price of $407 per acre in 1966
past the $400 mark for the first time. Nominal
prices shown in
Figure 1 reflect the actual prices paid while
represent those nominal prices adjusted for inflation.
The real price
change indicates that in terms of purchasing
power, prices rose
12 percent above inflation in the first
half of 2007
compared with the same period in 2006.
At 82 acres, the
typical transaction size hit a new low, substantially
below the 140-acre levels posted in 1997–98 (Figure 3).
2007, the geographic distribution of land prices continued
to reflect both
population density and the draw of scenic
the highest prices surrounding metropolitan
stretching through the Hill Country. West Texas
continued to post
the lowest land prices.
percentage price gains were concentrated along
the Gulf coast and
the periphery of the Hill Country. Activity
in the Fort Worth
area also propelled prices strongly upward.
Some metro areas
appeared to have cooled from 2006 markets,
prices in some cases.
developments in the first half of 2007 (Figures 4 and
5) reflected an
emerging disposition among buyers to
escalated asking prices in many areas of the
state. Still, the
supply of land for sale remains tight, and
healthy. The rapid escalation of South
Texas prices seen
in recent years has moderated in some
sellers have reduced asking prices.
leverage is evident in some areas,
cash is still
plentiful and looking for investments in
the tight market.
These factors point to a further rise
historically high prices in the near term.
dynamics suggest that the strong market
run up that began
in 2003 may be maturing.
Dr. Gilliland (firstname.lastname@example.org)
is a research economist and
research assistant with the Real Estate Center at Texas
sales are slowing somewhat, but prices are still
rising. For the
first time, the per-acre price was over $2,000,
for the first half of 2007.