The Texas land market saw bargain hunters staring down unmotivated sellers throughout 2009. The end result, according to Charles Gilliland and Abhijeet Gunadekar at the Texas Real Estate Center, was a dearth of property sales of more than $1 million and the lowest total number of transactions since 1995:

“Most Texas acreage is grazing land with a strong recreational usage element. Markets for that kind of property weakened in 2009 while cropland markets generally continued to prosper. Because pasture and rangeland make up more than 80 percent of the land in Texas, overall market indicators largely reflect conditions in the market for those property types.”

The researchers tabulated 4,138 transactions in 2009, the lowest number since 1995. The average price per acre of $2,086 was off just 7 percent from the record high of $2,247 per acre in 2008.

The Texas Real Estate Center is the nation’s largest publicly funded organization devoted to real estate research. The Center’s staff conducts research on financial, socioeconomic, public policy, trade, legal, land use, and local market analysis issues related to Texas real estate.

Read the complete story, which was originally published in Tierra Grande, HERE.

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A: The weak dollar makes Texas land less expensive to foreign investors and some have already taken advantage of the situation by purchasing timberlands in East Texas. As of July, there did not appear to be a rush of offshore investors into the market. However, some U.S.-based buyers appear to be anticipating future inflation as they aggressively seek out properties that are not offered for sale. These forces undeniably continue to exist.

The question focuses on the effects of the credit crunch and housing market woes. Currently, the volume of sales in rural Texas appears to have slowed from the frenzy of activity in the past three years. The future depends on the Federal Reserve’s response to the credit crunch and associated home market slowdown. If the Fed continues to augment the money supply by cutting the fed funds rate, as some pundits have urged them to do, many investors will likely see a higher risk of inflation in the future. 

That view will prompt more activity in the land market. On the other hand, if the downward spiral in the housing markets precipitates a recession, land markets will likely falter. At this writing, it is far from clear which path the economy will follow. Judging from past experience, the Fed will probably try to avoid recession by expanding the money supply until the panic subsides. That prescription will breathe new life into Texas land markets as inflation driven investors seek a safe store of wealth. Additionally, Texas land will become even more attractive to foreign money. If the Fed pursues this strategy, Texas land markets will thrive. 

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Dr. Charles Gilliland is a research economist at the Texas A&M Real Estate Center.

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