Land prices soar in Central Texas as investors flood in

The 7,000-acre Robinson Ranch in Northwest Austin is a good example of rural land being eaten up by big players. Apple is building its new campus there, and Amazon is on the verge of taking another chunk.

Cathy Cole has shown property from helicopters and on horseback. Sometimes a showing will take all day, as she takes a potential buyer around hundreds and hundreds of acres.

Cole has specialized in ranch and land sales in Texas for more than 30 years, a task she says is fundamentally different than other kinds of realty.

“It’s not the same animal,” she said.

Cole is now the sales manager in charge of a new venture from Compass Inc. The New York-based company just launched its Ranch + Land Division, which will be based out of Compass’s Houston office. Cole, who also serves as the director of the Texas Realtors Land Institute, lives in Brenham, about halfway between Austin and Houston.

The new division taps into a submarket that has exploded in the Austin metro in recent years. Ranches and farmland have more and more frequently been divvied up and sold to developers. This phenomenon has been felt acutely southeast of Austin, where Tesla Inc.’s electric vehicle factory (and new headquarters) has driven up demand, a process being repeated now north of town after Samsung Electronics Co. Ltd. picked Taylor for a $17 chipmaking plant. Apple Inc.’s existing campus on Parmer Lane in Northwest Austin, as well as a second nearby that’s nearly complete, both are on land that once belonged to the owners of Robinson Ranch.

Local Realtors are having to develop new expertise in ranch and land sales, as buyers begin to see them as extremely valuable assets. Realtors told Austin Business Journal earlier this week that many investors and buyers are looking toward places like Bastrop, particularly as home prices in the immediate vicinity of tech giants continue to rise.

Buyers eyeing this land seem to have the right idea, especially if they’re looking to turn a profit.

According to the latest numbers from the Texas Real Estate Research Center at Texas A&M University, the average price per acre in the Austin-Waco-Hill Country market reached $5,290 in the third quarter, up 30% year over year. Almost 60% more acreage changed hands last quarter than in Q3 2020.

Rising land prices mean higher overhead for new housing, a significant factor in rising home prices in the Austin area. In October, the median house in the metro cost $455,000, according to the Austin Board of Realtors. At the same time, the need for new housing was extreme, as the area had only one month of inventory. This is a far cry from a healthy market’s inventory of six months.

Texas A&M research economist Charles Gilliland, who’s been monitoring the land market since 1983, said he’s never seen annual price appreciation quite like this. He attributes most of the activity in the Austin area to investment and speculative buyers, rather than end-users. He said many likely don’t have plans for the land yet, but they want to close on deals while the market is hot.

“That’s typical for those kinds of land investors,” Gilliland said. “They try to buy land in the path of progress, to get it a couple of years before the demand for it is ripe, then reap the benefits when they actually sell it.”

He said the uptick in demand during Covid-19 was not met with a similar supply increase. People who had land just weren’t too inclined to let go of it.

“The recurring complaint that I hear from rural land brokers is they don’t have any inventory,” Gilliland said. “They have plenty of buyers lined up, but they don’t have anything to sell them.”

Gilliland said he’s heard from some land professionals that are amazed by the sales prices of some of these deals, saying buyers might even be overpaying in some cases. Even so, the price appreciation will likely continue, he said.

“I don’t see anything that is pointing toward the music stopping, if you will,” Gilliland.

Other experts agree that this land frenzy is unlikely to abate any time soon. Dallas-based ranch and land broker Bernard Uechtritz recently told the Dallas Business Journal that he thinks buyers are inspired by a John Wayne impulse to “have their own spread.”

Northeast Texas, for its part, has also seen a dramatic increase in prices, up 28% year over year to $6,294 an acre. The Gulf Coast-Brazos Bottom area had a slighter increase but reached a higher peak, with a single acre now costing $7,794 on average.

Cole said she’s seen it all in terms of buyer profiles: people wanting to move out of urban areas because of Covid-19, people choosing to retire, people looking for hunting ranches and people looking to use the land for farming and agriculture. She’s also seen developers buying land to subdivide.

“It’s many-faceted,” Cole said. “It isn’t a one-thing-fits-all. It never is, because no two ranch land properties are the same.”

Cole said the demand has made it the perfect time to expand into the market.  

“Everybody is just biting at the bit because they’re ready,” she said. 

Courtesy of Austin Business Journal. See the full article here.