An economic analysis of the rural land market in Texas

Abstract

The rural land market in Texas has been typified for the last 30 years with general increases in values. These increases have been erratic which has resulted in uncertainty for lending institutions, agriculturalists, investors, and others involved in the rural land market. Major changes in economic conditions, such as those in 1969 and 1974, aggravate the situation; and, in some cases, result in large price adjustments. The overall purpose of this research is to improve the predictability of rural land market shifts in value. Two specific objectives were identified: 1. To study the extent that future rural land values in Texas are influences by identifiable economic factors. 2. To formulate models which will predict futures changes in rural land values in Texas. The 24 State Planning Regions of Texas El Paso County are to be the basic units for evaluation. El Paso County is separated from Region 8 because of dissimilarity of land characteristics and value. Sales data from actual transactions are used to analyze the market. The time period of the study is ten years (1967-76). Sales data and economic factors are used in a multiple regression analysis to ascertain which factors may be valuable as predictors of value changes. The economic factors found to be significant most frequently were: (1) index of agricultural prices; (2) effective income; (3) interest rates; (4) population; (5) consumer sentiments; and (6) agricultural income. The significant variables for the State were: (1) agricultural income; (2) consumer sediments; (3) interest rates; and (4) lagged price per acre. The turning points of the predictive models, for the most part, corresponded with the actual turning points in the market. Therefore, the study concluded that shift in rural land values on a regional and state basis may be predicted with some degree of accuracy utilizing current data for effective buying incomes, agricultural incomes, interest rates, population, farm price indexes, and an index of consumer sentiments.