January 11, 2023 | By: Dustin McClendon |Budgeting and Saving, Investing, Landownership, Rural Living
If you’re wondering if buying land in Texas is a good investment these days… you’re not alone. After a slight slowdown from 2021 peaks, rural land sales in Texas are still going strong.
But before you jump on the Texas real estate trend, it’s important to understand your potential expenses: How much is an acre of land in Texas? Is investing in Texas real estate right for you?
The answer could depend on geography, market fluctuations, and more.
How much is an acre of land in Texas?
The average price per acre of rural land in Texas was more than $4,000 per acre in 2022, according to the Texas Real Estate Research Center. That average climbed each quarter:
- $4,116/acre average in Q1 of 2022
- $4,297/acre average in Q2
- $4,426/acre average in Q3
How much you’ll pay will also depend on what region you target. There are seven different market regions throughout Texas when it comes to rural land: Panhandle and South Plains, Far West Texas, West Texas, Northeast Texas, Gulf-Coast – Brazos Bottom, South Texas, and Austin – Waco – Hill Country.
Throughout those regions, the range in prices per acre is just about as wide as Texas itself.
If you’re in the Dallas-Fort Worth area searching for land nearby, for example, you might pay more than other regions in Texas. Land in Northeast Texas goes for roughly $6,742 per acre, according to the Texas chapter of the American Society of Farm Managers & Rural Appraisers. Most counties within this region have seen price increases, and brokers have said properties spend only days on the market.
In Southern Texas, including the southern portion of the Edwards Plateau, pieces of the Coastal Plains and Coastal Bend, South Texas Brush Country, and the Rio Grande Valley, demand for ranches in particular has remained strong. In 2021, the median price in this region was about $4,500 per acre.
In other parts of Texas, you could also:
- Find land in the Panhandle and South Plains area for roughly $1,300 per acre
- Pay upwards of $5,000 per acre in Austin – Waco – Hill Country, where sales volume grew a whopping 102% last year
- Shell out more than $8,000 per acre of land in the Gulf Coast – Brazos Bottom region
Other hot markets for land in Texas include West Texas, where sales jumped by 53.28% from 2020 to 2021.
So what is driving all these boosts in Texas land prices? It’s a mix of both historical trends and ongoing effects from the pandemic.
Why is farmland increasing in value in Texas?
The rise in farmland value in Texas has happened because of several factors:
- Increased demand for land. While the very beginning of the pandemic yielded slower land sales in Texas, that all changed as COVID-19 dragged on. As many urban areas continued gathering restrictions and more companies instituted remote work policies, more people migrated to rural areas.
- Decreasing availability of land. Since farmland is not a renewable resource, the value of what exists remains high, even as other investments may fluctuate.
- More competition from a bigger population: Texas added nearly 4 million new residents from 2010 to 2020, and ranked first in the U.S. in numeric population growth. They’ve all got to live somewhere, so competition is hot for the available land throughout the state.
Things have slowed down a little since the “hyperactivity” in 2021. That year saw a record for land sales in Texas, with 846,347 acres sold (a 53% jump from 2020). Still, even as the market has evened out, land value is still high.
How much does land cost in Texas?
At least compared to some other states, land in Texas comes with a moderate price tag. Average prices can top more than $8,000/acre in states like California, Iowa, and Illinois. This year has also seen record land prices in places like Iowa, where sales have sometimes topped $25,000 per acre.
The amount you’ll pay for an acre of land in Texas could also partially depend on what kind of acre it is. According to the USDA, average value of Texas cropland in 2022 was higher than average value of Texas pastureland (by about $400/acre), for example.
Where is the cheapest land in Texas?
You’re likely to find the cheapest Texas acres in the Panhandle and South Plains region, or in Far West Texas.
Although price per acre has still been increasing in the Panhandle and South Plains, you could still find land there for an average of $1,511 per acre in 2022.
Further west, the average price per acre in Far West Texas by the third quarter of 2022 was even lower, at $1,082.
Is buying land in Texas a good investment?
No investment is a sure thing. But no one is making new land in Texas anytime soon — so the land already here is incredibly valuable.
Average cropland value in Texas has been on a steady upward trajectory — and has nearly doubled since 2009. That year, average cropland value was $2,640/acre. That total value has climbed to an average of $5,050/acre in 2022, according to the Texas Real Estate Research Center.
Meanwhile, the annual compound 5-year growth rate of farmland in Texas has been between 9 and 11% throughout 2022.
Buying land in Texas could be a good investment, simply because land is an appreciating asset. However, it’s not a get-rich-quick option. The value of land often stems from being able to hold onto it over time.
But in the shorter term, you can also use your land for other money-making opportunities:
- Leasing your land: The rural landscape in Texas is filled with hills, plains, canyons, lakes, and more — making it the perfect place for hunting, fishing, camping, or other outdoor activities like ATVs. You can participate in recreational activities on your own land, or charge a fee for others to do the same.
- Timber: With so many wooded regions throughout the state, Texas offers many chances to sell timber from your land.
- Farm it: Prices for many crops and commodities have reached record highs, and demand for agricultural products continues to rise worldwide.
Will farmland prices continue to rise in 2023?
With rural land values increasing so much over the past couple years, it’s easy to wonder if we’re living in an historical boom for Texas farmland.
But those higher farmland prices are actually in line with historical trends that take into account farmland returns and interest rate levels.
Keep an eye on the Fed’s interest rates, which have continued to rise throughout the end of 2022. Sometimes higher interest rates can affect the value of land. But overall, farmland in Texas remains a valuable investment that carries a lower risk than many other investment choices.
Getting started with investing in Texas real estate
Purchasing acres of rural land in Texas can seem intimidating if you’re not familiar with the process. If you’re a first-time land buyer, here’s everything you need to know to get started. If you’re purchasing land in Texas to eventually build a home on, we have resources there too.
If you’re ready to purchase your land, Texas Farm Credit’s mortgage division can finance anywhere from 5 to 100 acres. Contact us for more information.