2nd Jan, 2017

Texas Land Markets Doing Well Despite Oil Decline

Texas Land Markets Doing Well Despite Oil Decline

Texas landAs oil markets waver, the Texas land markets forge ahead.  The Lone Star State’s strong economy probably has something to do with it—at least over the long term. Year over year land prices increased 2.25 percent by Q2 2016.  Smaller parcels are selling now, driving down the total dollar volume.  Values for Texas land now surpass $2500 an acre.  Compare that with $444 a half century ago.

Energy Sector Effects Land Prices

Energy prices declined over the past few years.  Cautionary research shows fewer Texas land sales in every region.  In their article (12/8/16), Charles E. Gilliland, Tian Su, and Clayton Watson addressed the effect of the changing Texas energy sector on land prices.

“Weak performances in Far West Texas, Gulf Coast-Brazos Bottom, and South Texas reflected downward market pressures from energy price declines.  Nevertheless, annualized price increases in the Panhandle and South Plains, Northeast Texas, and Austin-Waco-Hill Country regions offset results in regions with price declines. “

Personal Incomes Drive Prices Up

texas landThe authors also mentioned the long-term impact on land markets.  They expect that the 10 percent jump in Texas personal income will drive Texas land prices up 2.5 percent.  They also expect a 2 percent increase in total acreage sold.  Get this.  In contrast, a 10 percent increase in oil prices produces a 2 percent decline in total acreage transferred.  To read it from the horse’s mouth, look up “Down to Earth: Land Prices Changing Slowly,” from the Real Estate Center at Texas A&M University.

Regional Income Effects

Combine the minimal impact of oil with the rising personal incomes per capita.  What do we get?  Wayne Day and Luis B. Torres (12/5/16) reveal how incomes in Texas are outpacing the prices for real estate.  Regional patterns in this the large, diverse state of Texas also effect incomes.

For the past four decades, Texas personal incomes moved along with the national growth rate.  This year 2016 the Texas incomes have exceeded the U.S. average.  The Midland, Texas region far surpassed other regions.  Interestingly, the U.S. exceeded Texas in housing price appreciation except during oil booms.

Paycheck Reality

In an article entitled, “Paycheck Reality,” Day and Torres explain how interest rates, employment, changes in demographics, taxes, capital markets, availability of developed lots, and income all effect housing prices.  If the real estate market can only keep to the reality of the moment and not get ahead of itself, then the proverbial bubble can be avoided.  Nonetheless, an overall regulator of conditions is nowhere in sight.  Thank goodness.

Back to Texas Land

texas landWe have plenty of vacant land (supply) in Texas.  It is just waiting development (demand).  Gilliland, Su, And Watson graph stats over several decades.  For 2016 Q3, the prices per acre of $2544 was down a bit from Q2.  The 5-year growth rate is 6.36.  There were almost 5000 sales averaging 1,349 acres.

Real Estate Agents Texas Hill Country

Please contact Dale Cook of Sage Premium Texas Real Estate at 830-997-1035 for more information about Texas Hill Country real estate in Gillespie and Kerr counties.

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