Where all the cheap land at?
I rant and rave on a weekly basis about the goings on of the broader economy and how I think all of it might affect Texas real estate and land. But it is now that time of month where I keep the words to a minimum and let the data speak for themselves. Initially, I had my Dirt Data Disclaimer at the top of this article. However, I moved it to the bottom in an attempt to de-clutter. However, I respectfully insist that you read the disclaimer and understand the fallibility of the data outlined below (and the fallibility of any data you consume anywhere). Numbers and statistics are immensely useful and can tell a story. But absent context, they can also lead to false impressions (and therefore a fictional story). When it comes to real estate every parcel, street, neighborhood, and city is different. Specifics can and will vary. Real estate is not a commodity good. It is not fungible. There are no perfect substitutes. And, on the other hand, generally speaking, all things being equal, generalities do not apply in general.
Down and Dirty this month
Texas land experienced an incredible increase in sticker price over the past 24 months.
Land real estate prices lag the higher volume, faster moving, far more leveraged, and hence more volatile residential real estate sector.
The residential market in Texas is swooning with increased interest rates (and more yet to come).
Land prices are beginning to slow and soften.
This becomes more true the closer one gets to the biggest cities. It is also more true the more similar a land parcel becomes to a residential parcel (and therefore possibly subject to the need of a mortgage.
If land real estate in Texas is going to join in the general downturn, we are still at the very front of the downward trend. However, I feel (emphasis on the word feel) that while land will trend slightly downward, it will mostly hold the dollar value increases enjoyed over the past two years due to the relative insensitivity of land price to interest rates.
Average October listing price per acre by county
Month-over-month percent change in average listing price by county
Prices for ‘acreage properties’1 across Texas are beginning to decline but not quickly (real estate prices tend to be “sticky”). Of the 254 counties in Texas, 121 counties saw a month over month price per acre increase from September, and 118 counties saw a price decline (15 counties did not have any or enough data). Declines thus far have been slight with most acreage declines occurring near the largest Texas cities.
Year-over-year percent change in average listing price by county
Considering the dramatic increase in real estate across the nation last year (and well into the first part of this year), the following information should not be a surprise. Comparing listing prices per acre for October of 2021 to October of this year, 204 Texas counties saw an annual price increase. Only 38 counties saw a year over yer price decrease and most of those were in volatile counties with fewer listings (and data points, see disclaimer below). That said, there are some counties nearer the large metros (e.g. Parker - Ft Worth, Fort Bend - Houston), and one large metro county (Travis - Austin) that show a YoY price decrease. For now, I’ll leave out guesses as to why and simply note those as interesting.
Listing Trends
October saw a slight increase in the number of month-over-month listings. Of the 254 Texas counties, 160 increased in number of listings and 91 decreased (3 counties did not have any data). Listings for the entire state of Texas on Landwatch.com increased 1.43% from September. In light of the current interest rate environment and the muddy sludge through which residential real estate finds itself, this begs the question: is the advance in land listings merely a normal seasonal uptick or will land real estate mirror residential into the future in its own, slow way (the axiom being that land lags residential by about 6 months)? We will probably really not know until spring. Stay tuned.
Where the leveraged things play (and where they don’t)
For a while now, I’ve taken on faith the statement that land is less volatile than other types of real estate (and assets) because it is less leveraged (amongst other reasons). I am researching that axiom now, and my hypothesis is that, generally speaking, land is less leveraged than both commercial and residential real estate (e.g. fewer mortgages with far lower debt-to-equity for those with a mortgage). So far, that statement holds true. But I am still digging and this topic will be the subject of a future Deep Dive.
What? What did I miss?
Dear reader, I am Dirty and Nerdy and like to research. But while the mind is willing, my vision is still narrow. I very much hope that you will leave a comment with your feedback on the data above. What are you seeing in your part of Texas? Where am I wrong? What news did I miss? I do not write as an authority with final say. I write as an enthusiastic student seeking the truth. If you prefer not to comment, please shoot me an email at thedirt@dustinhammit.com. I still want to read what is on your mind. My eyes and ears are open, my nose is close to the ground. As always, thanks for reading.
Disclaimer on Dirty Data
The information contained in this report comes from LandWatch.com and the Lands.com network. Lands.com does not provide neat and tidy research information like Realtor.com or Zillow which means I painstakingly search and then copy all of this information to a spreadsheet. I also work alone and do not have an army of fact-checkers and researchers at my disposal. Because I am a Dirty human, I am given to mistakes and errors. I try very hard to be accurate and spend a lot of time scrubbing my data of its dirt. But there will still be errors and omissions from time to time. Also, the data is constantly in flux: I may conduct a search on a particular date and time and then 10 new listings might be created 10 minutes later. So treat this information as a ‘snapshot in time’. For my non-RE professionals out there, keep in mind that this is all based on listing data which is an asking price. Actual sales prices will vary.
Please note that the price data from Lands.com is derived using their own methodology (as it pertains to selecting which listings to use for their price averages). Ostensibly Lands.com does this to remove outliers and present smooth(er) price data. But as I do not have access to their raw data, I cannot vouch for their methodology. I merely present it here for consumption.
Lastly is the issue of sample size. Some counties have far more listings (and therefore useable data) than others. In other words, Lands.com might use only half the listings for their price averages for a county with over 100 listings because there are plenty of listings and they can do away with outliers. Alternately, for a county with only a few listings per year, they will use all of these data. This presents a potential problem of representative accuracy; e.g. one really big listing can sway and skew the average to the upside or downside. It also means that when I present data in terms of percentages, those counties with fewer listings might appear to be more volatile when it is really an issue of small sample size. All that written, review the map below: the data trends from red to blue in terms of numbers of data points. The darker blue the county, the more data and the more likely those data are to be representative and therefore accurate. The darker the red, the less trustworthy and more volatile the percentages offered above.
**All this to say that all of this is very Dirty Data and should only be used for information and entertainment purposes.
I define an acreage property as any property over 11 acres.