This article is featured in the Fall 2020 issue of Texas LAND magazine. Click here to find out more.
The Covid virus economic shutdown combined with plummeting oil prices enacted a toll on Texas land markets in the second quarter of 2020 according to preliminary results reported to the Real Estate Center at Texas A&M University. Evidencing the negative impact of the shelter-in-place orders, the number of closed sales dropped 13.0 percent while prices barely inched up 2.0 percent over 2019 second quarter prices. The activity drop resulted in a -25.6 percent decline in the number of acres sold. That decline caused the total dollar volume to fall -24.1 percent to $1.1 billion down from $1.4 billion in the first quarter. Typical transaction size fell -2.5 percent to 1,306 acres pointing to a trend toward the sale of smaller properties. Overall, Texas statewide land markets posted encouraging results considering the negative forces battering the Texas and world economies.
Results varied across the state with some regions posting starkly negative results while others reported more mild experiences. The Panhandle and South Plains saw prices retreat -5.8 percent while activity plunged -19.7 percent as measured by the number of transactions or -24.1 percent in total dollar volume. As oil-patch industrial buyers abandoned Far West Texas markets, the reported number of sales collapsed -62.0 percent with price falling -43.2 percent and dollar volume plunging -79.3 percent. Observers report a large inventory of property for sale in Far West Texas. Contrasting with these regions, West Texas and Northeast Texas markets saw increasing prices (+13.0 and 5.4 percent respectively). However, the two regions saw the number of sales change by -16.3 and +16.6 percent. Northeast Texas also saw dollar volume drop -17.0 percent while West Texas dollar volume actually expanded +4.5 percent. Prices grew in the Gulf Coast—Brazos Bottom (+3.9 percent), South Texas (+2.3 percent), and Austin—Waco—Hill Country (1.5 percent) with the number of transactions changing -8.8, -30.0, and 0.0 percent respectively. Total dollar volume changes were -7.8, -19.4, and -4.4 percent respectively.
Although the numbers are preliminary, some of the deeply negative results are unlikely to become positive as the final reports reach the Center. The aenemic price growth and decidedly negative dollar volume result statewide points to a challenging market through the second quarter as transactions fell in many areas.
The path forward remains clouded in murky uncertainty. Many had anticipated that the COVID19 pandemic would abate by Summer, leading to an expanded opening of the economy. However, the continuing surge in cases threatens to derail the nascent economic recovery.
As we head into the Fall, quarantine-weary individuals look to the future with concern. The day of returning to “normal” appears to be receding further into the future. Despite these troubling trends, interest in rural properties appears to be increasing with brokers reporting a noticeable increase in phone calls and inquiries. A growing number of potential buyers appear to be motivated to escape cities with their political problems piled on the pandemic. Despite the challenges, the next quarter may see conditions improve in many rural land markets.