Texas Hill Country Land Market Trends and Implications for Landowners

Overview

According to the latest Texas Land Market Report by the Texas Real Estate Research Center. there are significant shifts in the commercial land market within the Texas Hill Country, which includes key counties like Bexar, Comal, Kendall, Hays, Blanco, Kerr, Gillespie, and Burnet.

The Texas land market has experienced a blend of growth and decline. The latest developments reveal a complex picture of the state’s land transactions through the fourth quarter of 2023.

Sales volume has seen a significant decrease, with annual sales volume dropping by 44.6 percent to 3,699 in 4Q2023 from the previous year. This downturn in sales activity has brought the numbers down to levels not observed since 2013. Despite the reduced volume, land prices have continued to rise, maintaining a pace similar to the annual rate of increase from 2016 to 2019. The median price of land rose by 5 percent to $4,670 through 2023.

The report emphasizes that the statistics presented are indicators of past market conditions and should not be used as a substitute for an appraisal or market study of current local sales. For those interested in a more detailed regional analysis of Texas markets, the Texas Chapter of the American Society of Farm Managers and Rural Appraisers provides additional insights.

As the Texas land market navigates through these changing dynamics, it remains a vital component of the state’s economy and a key area of interest for potential buyers and sellers alike.

Key Market Trends

1. Decline in Sales Volume and Dollar Volume:
   • Sales in the Texas Hill Country dropped by 46.7% year-over-year (YOY), with a total of 928 sales[1].
   • The total dollar volume saw a 56.1% decline, falling to $307.1 million, marking the lowest fourth-quarter total since 2011[2].
2. Slight Decline in Prices and Transaction Sizes:
   • The annualized median price per acre slightly decreased by 0.9%, bringing it to $7,064 per acre[3].
   • Transaction sizes were down by 5.1%, averaging 203 acres, while total acres sold dropped by 55.7%, equating to 43,479 acres[4].
3. Market Activity and Interest Rates:
   • High-interest rates continue to curtail effective demand. Some investors, including cash buyers, are holding back, anticipating better opportunities in the near future.
   • Despite this downturn, high-quality tracts of land continue to command premium prices[5].

Implications for Landowners in the Texas Hill Country

Landowners Hold the Advantage of Patience:

• With fewer transactions and lower sales volumes, landowners may find that holding onto their properties could yield better returns when the market recovers. Market data suggests that the fourth quarter often sets a tone for stabilization or recovery phases.

Investment in Property Quality:

• Given that high-quality lands still attract interest, landowners could benefit from improving their property to ensure it falls into this desirable category. Enhancements in infrastructure, accessibility, and amenities could make these properties more attractive to discerning buyers.

Market Participation and Awareness:

• Staying informed and engaged with local market trends can empower landowners to make strategic decisions. Partnering with local experts like the Blue Collar Commercial Group can provide valuable insights and guidance specific to the Texas Hill Country market.

Flexible Pricing Strategy:

• Given the current market conditions, flexibility in pricing can help close deals faster without significant losses. Offering incentives or engaging in negotiation can make a big difference in high-demand areas.

Opportunities for Buyers

Speculative Land Purchases:

• Buyers interested in speculative land investments can take advantage of the current lower prices and reduced market competition. This could be a strategic time to secure properties that may appreciate significantly as the market rebounds.

Land for Development:

• For developers, the present market conditions could provide an opportune time to acquire larger tracts of land at favorable prices. Considering the expected stabilization or future rate cuts from the Federal Reserve, holding costs might also reduce in the near future[6].

Capitalizing on High-Quality Land:

• While the overall market might be showing a decline, high-quality lands are still selling at premium prices. Developers focusing on these high-valued parcels can expect better immediate returns. Ensuring that purchased lands are of high quality or improvising development plans can leverage this trend.

Final Thoughts

The Texas Hill Country land market is experiencing a transitional phase characterized by lower sales volumes and dollar volumes. While these trends present challenges, they also offer unique opportunities for both landowners and prospective buyers. Strategic patience, improvements, market awareness, and flexibility are key to navigating this landscape effectively. For those looking to buy speculative land or land for development, current market conditions present a tactical entry point, with potential significant long-term gains.

The Blue Collar Commercial Group, with its “Boots on the Ground” approach, stands ready to guide both sellers and buyers through these shifting dynamics, ensuring informed decisions and optimal outcomes for all stakeholders.