Following the turn of the year, preliminary first quarter reports on Texas land markets saw prices expand 6.99 percent (year-over-year) to an all-time high of $3,001 per acre. Demand for recreational and investment properties remained strong, despite the absence of independent oil operators in the current market. The typical size remained nearly steady at a 1.47 percent increase to 1,413 acres. The 5,661 reported sales fell 6.31 percent short of the 2019 volume. However, at $1.4 billion, total dollar volume expanded 6.10 percent from 2019. Overall, Texas statewide land markets maintained a vigorous level of activity with positive price trends. Positive price conditions prevailed in all Texas regions except for the Far West.
The especially strong performance in Texas and Louisiana seems irrelevant now that the corona virus shelter in place order has taken effect. The path forward remains clouded in murky uncertainty. Layoffs forced by sheltering orders have induced a pronounced recession whose severity currently eludes measure. Without extraordinary interventions, these negative forces would reverberate throughout the economy, possibly ushering in prolonged unemployment. Emergency government programs aim to soften the blow of the current downturn.
The way forward depends on how well these measures work to offset the negative pressures and how long the current curtailment of activity persists. All of that hinges on the evolution of the life cycle of the virus. If the current pandemic wanes soon, then the drastic isolation measures can abate. Everyone dusts themselves off and rushes back to work. We suffer a sudden violent dip in activity with a robust bounce back. Currently, governmental plans call for a cautious resumption of business as usual. However, doubts remain that the public will enthusiastically rush back to restaurants and other businesses so long as they perceive a viable threat. So, the rebound could be muted.
Should the virus persist or reemerge as a dire threat leaving carnage in its wake, layoffs may become permanent. Businesses could permanently close, leading to mortgage defaults and other unpaid debts, spreading damage throughout the economy. Such debilitating developments could result in a prolonged downturn and dwindling asset values including declining land prices. At this writing, we have no insight into which of these alternate realities will transpire.