OUTLOOK FOR TEXAS
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OUTLOOK FOR TEXAS RURAL LAND MARKETS -- 2003. Charles E. Gilliland Ph.D. Research Economist Real Estate Center Texas A&M University. Texas Association of Appraisal Districts Austin, TX -- February 25, 2003. THE OUTLOOK. Current Land Markets Future of Rural Texas

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Texas Association of Appraisal Districts Austin, TX -- February 25, 2003

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Texas association of appraisal districts austin tx february 25 2003

OUTLOOK FOR TEXAS

RURAL LAND MARKETS -- 2003

Charles E. Gilliland Ph.D.

Research Economist

Real Estate Center

Texas A&M University

Texas Association of Appraisal Districts

Austin, TX -- February 25, 2003


The outlook

THE OUTLOOK

  • Current Land Markets

  • Future of Rural Texas

  • Implications for Land Markets


Current developments happy days are still here

CURRENT DEVELOPMENTSHAPPY DAYS ARE STILL HERE

  • 2002 Another Good Year -- Mostly

  • Inventories Tight

  • Real Land Prices Rise


Texas association of appraisal districts austin tx february 25 2003

20012002 Change

Real $212$215 +1.4 %

Nominal$945$972 +2.9%

Volume4,7134,723


Very important buyer motives fall 2001

VERY IMPORTANT BUYER MOTIVES FALL 2001


Texas land buyers

TEXAS LAND BUYERS

  • Producers Must Compete For Land

  • Prosperity Supports Recreational Users

  • Non-Consumptive Recreation Grows

  • Eager Buyers


Very important seller motives fall 2001

VERY IMPORTANT SELLER MOTIVES FALL 2001


Texas land sellers

TEXAS LAND SELLERS

  • Estate Settlement

  • Retirement

  • Poor Agricultural Markets

  • Tight Supplies


Texas association of appraisal districts austin tx february 25 2003

Large Properties

1966-1982385 acres

1983-2002430 acres

Small Typical

50 acres144 acres

Note: Figures based on regional median tract sizes


Texas association of appraisal districts austin tx february 25 2003

TRENDS IN UNADJUSTED MEDIAN TEXAS LAND PRICES

20012002 Change

Small $1,317 $1,448 +10 %

Typical$897$871 - 3 %

Large$590$676 +14 %

Typical: First decline since 1991


Texas association of appraisal districts austin tx february 25 2003

Weighted Median Prices Per Acre

Texas Rural Land 1966-2001


Texas association of appraisal districts austin tx february 25 2003

Weighted Median Prices Per Acre

Texas Rural Land 1966-2001

  • Difference as percent of large tracts

  • 64 %

  • 2002 114 %

  • Pressure to Split Up Properties?


Texas association of appraisal districts austin tx february 25 2003

Average Since 1993

3 Year5.7 %

5 Year5.2 %

Since 1991

10 Year4.2 %


Texas association of appraisal districts austin tx february 25 2003

Average Since 1993

3 Year4.9 %

5 Year4.8 %

Since 1991

10 Year3.7 %


Texas association of appraisal districts austin tx february 25 2003

Average Since 1993

3 Year3.4 %

5 Year3.6 %

Since 1991

10 Year1.7 %


Fourth quarter 2002

FOURTH QUARTER 2002

  • Leveling Off?

  • Most Local Markets Still Increasing

  • Statewide:

    • 4th quarter $972

    • Last year $945

    • 3rd quarter $934


Fourth quarter 20021

FOURTH QUARTER 2002

  • Size Returning to Normal

  • Amarillo Area Increased 55 Percent

  • Buyers Skipping Over High Priced Areas

  • Timber Woes Hitting East Texas


Takeaways

TAKEAWAYS

  • The Party Continues

  • Current Uncertainty A Plus?

  • Recreation – Investment Dominate

  • Small Tracts On Fire

  • Continuing Climb in Non-Farm Markets

  • Typical Size Markets Weaker


Long term influences

LONG-TERM INFLUENCES

  • Rural Policy in Distress

  • Current Social Context

  • Negotiating a New Social Contract

  • Implications for Land Markets


Social contract frontier 1776 1880s

SOCIAL CONTRACT FRONTIER 1776 – 1880s

  • Exploration Promoted

  • Protection Afforded

  • Food Supplied

  • Raw Materials

  • Hard Currency

Farmers are Majority of workforce.

Farmer’s defined American society


Social contract storehouse 1890s 1970s

SOCIAL CONTRACT STOREHOUSE 1890s – 1970s

  • Subsidies

    • Transportation

    • Irrigation projects

    • REA

    • Direct payments to farmers

  • Low-Cost Food

After 1880 farmers are less than 50 % of workforce.

Farmer’s supplied America’s tables


Current social context

CURRENT SOCIAL CONTEXT

  • US A Suburban Nation

    • 1990 – Half of US in Cities of 1 Million

    • 1992 – Most Presidential Votes from Suburbs

    • 1994 – Top 5 House Positions Suburban

    • 1996 – House 82.5 % Non-Rural

    • 2000 – Majority of US in Suburbs

Source: Federal Reserve Bank of Kansas City


Why should we invest in rural america

WHY SHOULD WE INVEST IN RURAL AMERICA?

  • Most Americans could care less if farming and ranching disappear, as long as they get their burgers and fries….

    Stephen Blank-- The End of the American Farm?

Source: Federal Reserve Bank of Kansas City


New social contract

NEW SOCIAL CONTRACT

  • No Social Contract Since 1970

  • Rural Interests Holding on to Subsidies

  • Power and Savvy of Rural Special Interests

Source: Federal Reserve Bank of Kansas City


Rural policy in distress

RURAL POLICY IN DISTRESS

  • Characteristics of Rural Policy

    • Agriculture -- Lowest Cost Producers

    • Manufacturing -- Low Cost Labor


New social contract1

NEW SOCIAL CONTRACT?

  • Survival of Rural Middle Class

  • Reducing Concentrated Rural Poverty

  • Sustaining and Improving Natural Environment

    Karl N. Stauber Ph.D. -- The Economic Review; 2nd Qtr,2001

Source: Federal Reserve Bank of Kansas City


New social contract2

NEW SOCIAL CONTRACT?

  • Protect and Restore Environment

  • Produce High-Quality Local Food

  • Create a Laboratory of Social Innovation

  • Produce Healthy, Well-Educated Citizens

  • Prevent Urban Overcrowding

    Mark Drabenstott Ph.D. and Katharine H. Sheaff -- The Economic Review; 3rd Qtr,2001

Source: Federal Reserve Bank of Kansas City


Current agricultural policies actually hurting

“CURRENT AGRICULTURAL POLICIES ACTUALLY HURTING…”

  • “Absorbing Vast Majority of Resources…”

  • “Continuing Myth That Rural and Agriculture are the Same…”

  • “Making it Difficult … to Develop … Competitive Advantages…”

  • “Higher Land Prices for Farmers

Source: Federal Reserve Bank of Kansas City


Prescribed remedies

PRESCRIBED REMEDIES

  • Education

  • Conserve Natural Environment and Culture

  • Increase Regional Competitiveness

  • Create New Competitive Advantage

Source: Federal Reserve Bank of Kansas City


What works

WHAT WORKS

  • No Competitive Advantage = No Prosperity

  • Create New, Don’t Preserve Old

  • Build Social and Human Capital

Source: Federal Reserve Bank of Kansas City


Successful communities

SUCCESSFUL COMMUNITIES

  • Community Controversy Accepted

  • Schools Focus on Academics

  • Resources to Support Joint Risk Taking

  • Raise Taxes to Fund Infrastructure

  • Community Inclusive

  • Leadership Dispersed and Flexible

Source: Federal Reserve Bank of Kansas City


What doesn t work

WHAT DOESN’T WORK

  • High Levels of Class Division

  • Dominance By Elites

  • Lack of Leadership

Source: Federal Reserve Bank of Kansas City


Takeaways1

TAKEAWAYS

  • Rural Communities Are at Risk

  • Rural Community Leadership Critical to Success

  • “Smaller” is Better?

  • Debate has Begun

  • Center for the Study of Rural America http://www.kc.frb.org/RuralCenter/RuralMain.htm


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