http://recenter.tamu.edu/pdf/1851.pdf
LF 2007
Charles E. Gilliland
Research Economist
Nirad Pachchigar
Research Assistant
Texas Land Market
Developments – First Half 2007
Texas A&M University
February 2008
© 2008, Real Estate Center. All rights reserved.
1
Texas Land Market
Developments – First Half 2007
Summary of Texas Land Market
Developments – First Half 2007
•
Volume of sales faltered in the first half of 2007, falling to3,769 sales compared with 5,452 2006 first half sales, a
31 percent drop.
•
Prices rose 15 percent, from $1,811 per acre in 2006 to$2,076 per acre in 2007, continuing the rapid price appreciation
trend since 2004.
•
Size of properties dropped to a new low of 82 acres in2007.
•
Prices rose strongly throughout the state.•
The 2007 market saw growing interest in land as aninvestment.
•
Some investors appear to perceive inflation in the future.•
Some observers see a noticeable increase in the numberof buyers who immediately offer the property for resale at
a higher price.
•
The market continues to see a dearth of quality propertiesfor sale, contributing to the slowdown in sales volume.
•
Although observers express concern about emergingcaution among buyers prompted by the rate of price increases,
the second half of 2007 should produce another
sizable gain in prices.
•
Although use of leverage rose in 2007, the market stillinvolves substantial percentages of cash.
Prices Up, Volume Down
T
exas land prices have spiraled to ever-higherlevels in the past five years, leading many
to ponder the future of a market trading at
unprecedented levels. In burgeoning markets buyers
often scramble to grab anything offered for sale. But
when uncertainty surfaces, buyers tend to become
more cautious, focusing on top-quality properties.
While the first-half 2007 land market does not
reflect such a shift to quality-driven sales, evidence
suggests that the long-anticipated cooling of the
market may have begun. Specifically, the number
of reported sales in the first half of 2007 confirms a
widely perceived slowdown in transaction volume in
Texas rural land markets.
While more first half sales remain to be reported,
the 2007 first-half volume of 3,769 sales dropped
31 percent below the 2006 first half volume of
5,452 (Figure 1). The 2007 level of activity roughly
corresponds with the volume registered in 2002 land
markets.
At 15 percent, the growth in sale price slowed from the
stratospheric 23 percent posted in 2005 (Figure 2). The 2007
first-half price was $2,075 per acre, topping $2,000 per acre
for the first time. The 2006 first-half price was $1,811 per
acre. Despite the deceleration in price growth, the 15 percent
increase nearly matches the 16 percent growth over the entire
year in the 2003 and 2004 markets.
While indicating the noticeable slowdown in sales volume
early in the year, market participants and observers noted
increasing interest in late summer and do not see potential
buyers abandoning the market. Two forces are contributing to
the slackening in activity.
First, potential buyers are still searching for land, but
continue to face shortages of quality properties for sale
throughout the state. Second, potential sellers have begun
to factor anticipated price growth into asking prices. The
resulting jump in asking prices has startled some buyers and
caused them to delay buying in hope of finding more desirable
properties for the price.
The real or inflation-adjusted price of $407 per acre in
1966 dollars pushed past the the $400 mark for the first time.
Nominal prices (Figure 1 and Table 1) reflect the actual prices
paid while real prices represent those nominal prices adjusted
for inflation. The real price change indicates that prices, in
terms of purchasing power, rose 12 percent above inflation in
the first half of 2007 compared with the same period in 2006.
At 82 acres, the typical transaction set a new low, indicating
a prevalence of small properties in the 2007 market. Tract size
1966 1974 1982 1990 1998 2006
8,500
7,500
6,500
5,500
4,500
3,500
2,500
Number
of Sales
Source: Real Estate Center at Texas A&M University
Figure 1. Texas Land Market Volume
First Half 2007
2
LMAs 29, 30 and 31
— East Texas markets have notseen immediate flipping of deals, but some buyers
from 2004 and 2005 are now reselling at 25 to 35
percent profits. This market is largely cash-driven.
Bucking the trend elsewhere, LMAs 29 and 31 both
saw sales volume increase markedly in early 2007.
LMAs 12, 22 and 23
— These North Texas areasregistered regionwide increases with the Wichita
Falls and Fort Worth areas posting strongly higher
prices. Barnett shale activity continues to support
land-buying activity.
LMAs 25 and 27
— The Brazos River regions postedincreases of 20 and 19 percent in the first half of
2007. The market is awash in cash, with few large
properties for sale.
has dropped substantially under the 140 acre levels
posted in 1997–98 (Figure 3).
Price Distribution
In 2007, the geographic distribution of land prices
(Figure 4) continued to reflect both population
density and the draw of scenic amenities, with the
highest-priced land surrounding metropolitan areas
and stretching through the Hill Country. West Texas
continued to post the lowest land prices.
Figure 5 shows regional percentage changes in
prices per acre from the first half of 2006 to the first
half of 2007. The highest 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 off from
2006 markets.
The supply of land for sale remains tight and demand
remains healthy. Some markets in South Texas appear poised
to take a breather from the rapid escalation of prices in recent
years as some sellers have reduced asking prices.
Regional Developments
The following land market areas (LMA) registered especially
strong (statistically significant) trends compared with 2005
market levels. All regions experienced price increases in 2006.
The local developments reflected a voracious appetite for land
encountering a limited supply of listings. The following analysis
notes some of the forces driving those trends. Table 2 contains
detailed statistics documenting regional developments.
LMAs 19, 20 and 21
— Buyers discovered relatively lowerprices prevailing in these Coastal Bend regions in the first
half of 2007. Their quest for land drove prices higher with
percentage increases ranging from 28 to 42 percent. Although
there is still a lot of cash in the market, borrowing is becoming
more prevalent. Lenders report an increased demand for loans,
including from borrowers with substantial amounts of existing
debt.
1966 1974 1982 1990 1998 2006
160
150
140
130
120
110
100
90
80
70
60
50
Acres
Source: Real Estate Center at Texas A&M University
Figure 3. Texas Typical Tract Size
1966 1974 1982 1990 1998 2006
2,200
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
Dollars
Per Acres
Source: Real Estate Center at Texas A&M University
Figure 2. Texas Rural Land Prices
Real or Deflated
Nominal
LMAs 4, 6, 7, 8 and 9
— These West Texas regions saw medianprices rise 15 to 25 percent above comparable 2006 levels.
Brokers report struggling to find good properties to sell. The
volume of calls has increased and asking prices are about 30
percent higher than recent sale prices. This has made some
buyers hesitant, but sellers are standing firm.
LMAs 10 and 11
— In the Edwards Plateau–South and RioGrande Plains, the volume of transactions is substantially
down while use of leverage is up. Asking prices, which are
higher than last year, are no longer firm and price resistance is
evident. However, first-half 2007 prices rose 11 to 22 percent
above 2006 levels.
LMAs 13, 14, 15 and 16
— Prices in the periphery of the HillCountry and the Highland Lakes surged substantially, with
increases ranging from 19 to 43 percent. Observers report an
increase in investment-motivated purchases with an attendant
increase in numbers of properties bought and immediately
reoffered for sale. Prices are strong, but more bargaining is
going on.
3
08-1851
Figure 4. Land Prices, First Half 2007
$350 – $701
$702 – $2,200
$2,201 – $3,686
more than $3,687
Price
Source: Real Estate Center at Texas A&M University
See PowerPoint slide presentation at:
http://recenter.tamu.edu/speeches/CG102407Tyler.pdf
Figure 5. Land Price Change, First Half 2007
–21% – 8%
8.1% – 20%
20.1% – 25%
Up more than 25%
Change
Source: Real Estate Center at Texas A&M University
See PowerPoint slide presentation at:
http://recenter.tamu.edu/speeches/CG102407Tyler.pdf
4
Table 1. Nominal and Real Changes in Weighted Average
Price of Texas Rural Land, 1966–2007
Nominal Real
Annual Deflated Annual
Median Weighted Compound Weighted Compound
Tract Average Year-to -Year Pretax Average Year-to -Year Pretax
Size Price per Percentage Growth Rate Price per Percentage Growth Rate
Year (acres) Acre Change from 1966 Acre* Change from 1966
1966 120 $157 **** **** $157 **** ****
1967 110 169 8 8 164 4 4.5
1968 101 181 7 7 168 2 3.4
1969 100 190 5 7 168 0 2.3
1970 107 204 7 7 172 2 2.3
1971 110 213 4 6 171 –1 1.7
1972 120 233 9 7 179 5 2.2
1973 153 304 30 10 221 23 5.0
1974 150 372 22 11 248 12 5.9
1975 126 384 3 10 234 –6 4.5
1976 128 412 7 10 238 2 4.2
1977 121 436 6 10 236 –1 3.8
1978 126 485 11 10 246 4 3.8
1979 132 544 12 10 254 3 3.8
1980 138 613 13 10 263 4 3.8
1981 124 708 15 11 278 6 3.9
1982 105 773 9 10 286 3 3.8
1983 113 796 3 10 283 –1 3.5
1984 125 842 6 10 288 2 3.4
1985 118 865 3 9 288 0 3.2
1986 113 714 –17 8 232 –19 2.0
1987 130 611 –14 7 193 –17 1.0
1988 139 574 –6 6 176 –9 0.5
1989 141 562 –2 6 166 –6 0.2
1990 135 539 –4 5 153 –8 –0.1
1991 138 508 –6 5 139 –9 –0.5
1992 145 499 –2 5 134 –4 –0.6
1993 140 503 1 4 132 –1 –0.6
1994 136 544 8 5 140 6 –0.4
1995 122 586 8 5 147 5 –0.2
1996 111 638 9 5 158 7 -0.0
1997 139 657 3 5 160 1 0.1
1998 139 723 10 5 174 9 0.3
1999 120 786 9 5 186 7 0.5
2000 117 842 7 5 195 5 0.6
2001 101 945 12 5 214 10 0.9
2002 107 974 3 5 217 1 0.9
2003 100 1,097 13 5 239 10 1.1
2004 102 1,274 16 6 270 13 1.4
2005 100 1,483 16 6 305 13 1.4
2006 99 1,825 23 6 364 19
2.12007 82 2,076 14 6 407 12
2.4*In 1966 dollars
Source: Real Estate Center at Texas A&M University
5
Table 2. Trends in Texas Rural Land Markets, 2006–07
Source: Real Estate Center at Texas A&M University
Note 1: Test shows the result of a Mann-Whitney test of the indicated changes; (**) indicates significance at 99% level; (*) indicates significance at the 95% level;
all others showed no statistically verifiable trend
Note 2: Test data in the volume, size and price columns are rounded. Percentage calculations are based on unrounded numbers.
Land Market Area Volume of Sales Typical Size of Transaction Typical Prices
Acres per Sale Change Extremes Dollar per Acre Change Extremes
LMA Description 2006 2007 Percentage 2006 2007 Percentage TEST Minimum Maximum 2006 2007 Percentage TEST Minimum Maximum
1 Panhandle–North 65 59 –9 620 640 3 17 5,276 800 675 –16 3225 5,000
2 Panhandle–Central 163 98 –40 383 320 –16 * 10 4,160 560 589 5 211 19,319
3 South Plains 189 79 –58 194 196 1 11 6,400 585 650 11 119 6,250
4 Permian–West 231 117 –49 316 260 –18 15 31,076 578 700 21 ** 235 5,033
5 Canadian Breaks 24 24 0 640 482 –25 69 2,457 451 442 –2 148 1,278
6 Rolling Plains–North 123 86 –30 359 234 –35 ** 20 2,726 563 701 25 ** 199 5,400
7 Rolling Plains–Central 164 131 –20 206 162 –22 12 1,241 650 899 38 ** 199 11,505
8 Trans-Pecos 33 17 –48 195 320 65 12 32,882 288 350 22 * 188 8,710
9 Edwards Plateau–West 269 162 –40 200 186 –7 10 27,758 960 1,100 15 * 78 8,582
10 Edwards Plateau–South 134 72 –46 161 105 –35 * 10 13,399 2,284 2,797 22 ** 637 19,608
11 Rio Grande Plains 86 79 –8 370 426 15 15 6,101 1,445 1,600 11 * 445 5,285
12 North Central Plains 351 246 –30 128 160 25 10 5,781 1,150 1,433 25 ** 325 10,692
13 Crosstimbers 367 224 –39 116 102 –12 11 1,254 1,800 2,200 22 ** 750 10,825
14 Hill Country–North 196 151 –23 148 100 –32 ** 10 4,369 2,100 3,000 43 ** 562 13,430
15 Hill Country–West 95 81 –15 280 128 –54 * 11 6,249 1,756 2,400 37 * 831 22,000
16 Highland Lakes 188 171 –9 60 60 1 10 6,651 4,381 5,200 19 ** 2,300 22,560
17 Hill Country–South 111 79 –29 45 43 –4 11 4,929 7,196 7,706 7 1,055 20,055
18 San Antonio 210 173 –18 43 49 15 10 2,309 4,103 3,686 –10 467 24,000
19 Coastal Prairie–North 235 189 –20 51 45 –11 10 615 3,100 4,303 39 ** 1,200 17,196
20 Coastal Prairie–South 107 57 –47 132 74 –44 ** 12 1,157 1,750 2,477 42 ** 950 8,687
21 Coastal Prairie–Middle 98 76 –22 117 90 –24 17 4,100 1,881 2,416 28 ** 471 14,658
22 Texoma 230 208 –10 45 48 6 10 1,949 3,000 3,206 7 * 904 24,310
23 Fort Worth Prairie 282 135 –52 33 25 –24 * 10 4,446 4,801 6,667 39 ** 600 21,593
24 Dallas Prairie 157 83 –47 44 42 –5 10 964 5,460 4,317 –21 850 25,000
25 Blacklands–North 340 281 –17 100 52 –48 ** 10 2,000 2,303 2,770 20 ** 599 18,909
26 Blacklands–South 352 196 –44 50 40 –21 ** 10 1,506 4,000 4,476 12 984 21,946
27 Brazos 165 115 –30 50 40 –19 10 455 3,890 4,624 19 ** 975 24,840
28 Houston 282 160 –43 30 38 24 10 1,936 6,006 6,485 8 949 23,636
29 North East 72 113 57 89 59 –33 * 10 1,678 1,413 1,505 7 * 482 7,605
30 Piney Woods–North 72 31 –57 112 69 –38 * 10 2,714 2,180 2,625 20 * 1,398 4,500
31 Piney Woods–South 23 39 70 94 55 –41 20 2,013 1,791 2,213 24 * 769 5,200
32 Lower Rio Grande Valley 37 36 –3 33 32 –3 10 818 5,500 5,164 –6 1,316 20,899
33 El Paso 1 1 0 145 12 –92 – 12 12 10,791 10,852 1 – 10,852 10,852
Texas 5,452 3,769 –31 102 82 –19 ** 10 32,882 1,811 2,076 15 ** 78 25,000
6
Source: Real Estate Center at Texas A&M University
1 Panhandle–North 12 North Central Plains 23 Fort Worth Prairie
2 Panhandle–Central 13 Crosstimbers 24 Dallas Prairie
3 South Plains 14 Hill Country–North 25 Blacklands–North
4 Permian–West 15 Hill Country–West 26 Blacklands–South
5 Canadian Breaks 16 Highland Lakes 27 Brazos
6 Rolling Plains–North 17 Hill Country–South 28 Houston
7 Rolling Plains–Central 18 San Antonio 29 Northeast
8 Trans-Pecos 19 Coastal Prairie–North 30 Piney Woods–North
9 Edwards Plateau–West 20 Coastal Prairie–South 31 Piney Woods–South
10 Edwards Plateau–South 21 Coastal Prairie–Middle 32 Lower Rio Grande Valley
11 Rio Grande Plains 22 Texoma 33 El Paso
Texas Land Market Areas
7
Land Market Area 1
Dallam
Hansford
Hartley
Moore
Ochiltree
Sherman
Land Market Area 2
Armstrong
Briscoe
Carson
Castro
Deaf Smith
Gray
Parmer
Randall
Swisher
Land Market Area 3
Borden
Crosby
Dawson
Floyd
Garza
Hale
Lubbock
Lynn
Land Market Area 4
Andrews
Bailey
Cochran
Ector
Gaines
Hockley
Howard
Lamb
Martin
Midland
Terry
Yoakum
Land Market Area 5
Hemphill
Hutchinson
Lipscomb
Oldham
Potter
Roberts
Land Market Area 6
Childress
Collingsworth
Cottle
Dickens
Donley
Hall
Kent
King
Motley
Stonewall
Wheeler
Land Market Area 7
Fisher
Jones
Mitchell
Nolan
Runnels
Scurry
Taylor
Land Market Area 8
Brewster
Crane
Culberson
Hudspeth
Jeff Davis
Loving
Pecos
Presidio
Reeves
Terrell
Ward
Winkler
Land Market Area 9
Coke
Concho
Crockett
Edwards
Glasscock
Irion
Kinney
Reagan
Schleicher
Sterling
Sutton
Tom Green
Upton
Val Verde
Texas Market Areas and Counties
Land Market Area 10
Frio
Maverick
Medina
Uvalde
Zavala
Land Market Area 11
Brooks
Dimmit
Duval
Jim Hogg
Kenedy
La Salle
McMullen
Starr
Webb
Zapata
Land Market Area 12
Archer
Baylor
Clay
Foard
Hardeman
Haskell
Jack
Knox
Shackelford
Stephens
Throckmorton
Wichita
Wilbarger
Young
Land Market Area 13
Brown
Callahan
Coleman
Comanche
Eastland
Erath
Land Market Area 14
Hamilton
McCulloch
Mills
Lampasas
San Saba
Land Market Area 15
Kimble
Menard
Real
8
Land Market Area 16
Burnet
Gillespie
Llano
Mason
Land Market Area 17
Bandera
Blanco
Kendall
Kerr
Land Market Area 18
Atascosa
Bexar
Comal
Guadalupe
Karnes
Wilson
Land Market Area 19
Colorado
DeWitt
Fayette
Gonzales
Lavaca
Land Market Area 20
Aransas
Bee
Goliad
Jim Wells
Kleberg
Live Oak
Nueces
Refugio
San Patricio
Land Market Area 21
Calhoun
Jackson
Matagorda
Victoria
Wharton
Land Market Area 22
Cooke
Fannin
Grayson
Montague
Land Market Area 23
Hood
Johnson
Palo Pinto
Parker
Somervell
Tarrant
Wise
Land Market Area 24
Collin
Dallas
Denton
Ellis
Hunt
Kaufman
Rains
Rockwall
Van Zandt
Land Market Area 25
Bell
Bosque
Coryell
Falls
Freestone
Hill
Limestone
McLennan
Navarro
Land Market Area 26
Bastrop
Caldwell
Hays
Lee
Milam
Travis
Williamson
Land Market Area 27
Brazos
Burleson
Grimes
Leon
Madison
Robertson
Washington
Land Market Area 28
Austin
Brazoria
Chambers
Fort Bend
Galveston
Hardin
Harris
Jefferson
Liberty
Montgomery
Orange
San Jacinto
Walker
Waller
Land Market Area 29
Bowie
Camp
Cass
Delta
Franklin
Hopkins
Lamar
Marion
Morris
Red River
Titus
Upshur
Wood
Land Market Area 30
Anderson
Cherokee
Gregg
Harrison
Henderson
Houston
Nacogdoches
Panola
Rusk
Shelby
Smith
Land Market Area 31
Angelina
Jasper
Newton
Polk
Sabine
San Augustine
Trinity
Tyler
Land Market Area 32
Cameron
Hidalgo
Willacy
Land Market Area 33
El Paso
9
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