“The word is out that Texas is cheap on both coasts where real estate markets have gone crazy. There’s plenty of anecdotal evidence that people are cashing out in those markets and coming here and buying much more ground.”
Price isn’t the only thing attractive about land in Texas.
“Most of those guys apparently really like Texans attitudes toward property rights.”
Dr. Gilliland says there was a definite change in the land market after 9/11.
“It made people want to invest in something that was more secure than maybe stocks and bonds, that was more tangible. At least with real estate you know what you’ve got. Then the corporate scandals and all those sorts of things didn’t help the situation.”
And higher demand means higher prices.
“In 2003 we had about a 13% increase in our statewide price, in 2004 it was 16%, and through the first 3 quarters of 2005 it’s another 13%. Those are substantial. Think about that. That’s 1% per month appreciation rate.”
Some people worry about a crash in real estate like we saw in the 1980s. While a little caution is always prudent, Gilliland says this market is different.
“The 80s were based on an awful lot of borrowed money and from all indications I get these current land markets involve a lot of cash deals. Full equity, in other words if the economy softens, these people are not going to be hard pressed to make payments because they simply are not making payments.”
Next week we’ll talk about how all of this is effecting Ag producers.