Charles E. Gilliland Ph.D.
Real Estate Center Mays Business School Texas A&M University
Investment! Investment! Recreation?
SOURCE CREDIBILITY
But you told me the same thing last year and then Texas had 23 percent growth!
CENTER’S LAND PRICE RESEARCH
• • • • Sales Reported by Professionals Limited Information Focused on Rural Markets Approximately 8,000 Sales 8 000
TEXAS RURAL LAND PRICES
Dollars/Acre
2,200 , 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 1 1966
Nominal Real or Deflated
1 1969
1 1972
1 1975
1 1978
1 1981
1 1984
1 1987
1 1990
1 1993
1 1996
1 1999
2 2002
2 2005
TEXAS RURAL LAND PRICES
Dollars/Acre
2,200 , 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 1 1966
Nominal
Real
Real or Deflated
$215 $240 $1,097 13%
2002
2003
2004 $273
2005 $307 $1,483 16%
2006 $364 $1,825 23%
2007Prelim. $413 $2,176 19%
Nominal $974 Increase
$1,274 16%
Volume 5,882
7,283
8,073
8368
8,215
7,039
1 1969
1 1972
1 1975
1 1978
1 1981
1 1984
1 1987
1 1990
1 1993
1 1996
1 1999
2 2002
2 2005
TEXAS RURAL LAND PRICES
Dollars/Acre
3,000 2,800 2,600 2,400 2,200 2,000 2 000 1,800 1,600 1,400 1,200 , 1,000 800 600 400 200 0
Nominal Real o Deflated ea or e ated
1 1966 1 1968 1 1970 1 1972 1 1974 1 1976 1 1978 1 1980 1 1982 1 1984 1 1986 1 1988 1 1990 1 1992 1 1994 1 1996 1 1998 2 2000 2 2002 2 2004 2 2006 2 2008
SIGNIFICANT PRICE TRENDS PERCENT CHANGE 20062006-07 (Preliminary)
Blacklands--North (25) Hill Country--South (17) North East (29) Piney Woods--South (31) Piney Woods--North (30) y ( ) Rio Grande Plains (11) Rolling Plains--North (6) Crosstimbers (13) Edwards Plateau--So. (10) Blacklands--South (26) Brazos (27) Fort Worth Prairie (23) Highland Lakes (16) Panhandle--Central (2) Houston (28) Edwards Plateau--West (9) Hill Country--West (15) North Central Plains (12) Hill Country -- North (14) Coastal Prairie--North (19) Permian--West (4) Rolling Plains--Central (7) Coastal Prairie--South (20) C t l P i i S th Coastal Prairie--Middle (21)
12 13 13 15 16 18 20 20 20 21 23 23 23 23 25 26 27 27
33 35 36 37 38 40
41 50
10
20
30
0
TEXAS RURAL LAND VALUES
Dollars per acre
8,000 7,500 7,000 6,500 6 500 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 , 500 0
19 6 19 6 6 19 7 6 19 8 6 19 9 7 19 0 7 19 1 7 19 2 7 19 3 7 19 4 7 19 5 7 19 6 7 19 7 78 19 7 19 9 8 19 0 8 19 1 8 19 2 8 19 3 8 19 4 85 19 8 19 6 8 19 7 8 19 8 8 19 9 9 19 0 91 19 9 19 2 9 19 3 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 9 20 9 0 20 0 0 20 1 0 20 2 0 20 3 04 20 0 20 5 0 20 6 07
Source: Real Estate Center Mays Business School Texas A&M University
Texas Statewide Piney Woods North Area South Plains Area Kerrville Area
2007 IN A NUTSHELL
• Activity in Metro Areas Stalls?
– Dallas – San Antonio
• Market Focuses on Small Sales • Continued Price Growth? •M t i Maturing Market M k t
EARLY 2007
• Volume of Sales Off 24 Percent • All Significant Trends Are Up • Lack of Properties • Some Resistance to Increased Asking Prices • Cropland Selling Well l d lli ll
INSTITUTIONAL REAL ESTATE INVESTMENT • Need Up to 12 Percent to Eliminate Nonmarket Risk • Between 2 and 3 Percent in Real Estate
Journal of Real Estate Finance and Economics (2004)
USDA REGISTRATION
• Five Canadian Companies Own Interest in 84 Percent of Maine Foreign Owned Land • Texas Increase Traced to Eight Canadian Companies
FOREIGN INVESTMENT IN TEXAS AG LAND Acres
830,190 825,362
800,000 800 000
Cropland Pasture Forest
600,000
424,096
400,000
308,408 306,668
200,000
29,105
0 2005 5 2006 6
Source: USDA
HANCOCK TIMBER RESOURCE GROUP
• • • • • Global i b l d Gl b l Timberland Investment Manager Founded 1985 $ $6.6 Billion North America, Australia, New Zealand, Brazil Offices:
– – – – – Boston Charlotte, NC Vancouver, WA Silsbee, TX , Etc.
FOREIGN INVESTORS
• • • •
Californians C lif i Floridians Artists t sts Writers
FARMERS AND LAND
• P id t Bush Asks For Fivefold Increase President B h A k F Fi f ld I
in Renewable Fuels By 2017
• Requires 12.5 Billion Bushels of Corn • 119 Percent of 2006 Crop • Corn Futures Up 82 Percent 2006-07 2006-
INVESTORS AND FARMLAND
• Gl b l Warming Will Hinder Crops Global i ill i d C • Buy Farmland for at Least a Decade
Hedge fund manager
FARMERS AND LAND
• Gl of Ethanol? Glut f h l? • $4 80 December Corn $4.80 • $10 March Wheat $ 0 a c eat
WSJ Chi Chicago 1-08 1-
WSJ Minneapolis 1-08 SJ eapo s 1-
UP UP AND AWAY!
• Federal S b idi (New Energy Bill) d l Subsidies ( ill) • Belief in Rising Demand for Ethanol • Increasing Farm Rents (Up 16 c eas g a e ts 6
Percent Since 2003)
• Good Crops • Inflation
DÉJÀ VU ALL OVER AGAIN?
• 21 LMAs > $2 000 Per Acre LMA $2,000 P A • 10 LMAs > $4 000 Per Acre $4,000 • Prices 220 Percent of 2002 Price
• Largest 5 Year Increase • 69-74 Second at 196 Percent 69-
DÉJÀ VU ALL OVER AGAIN?
• Tech S k Bubble h Stock bbl • Dot-Com Bubble Dot• Residential Real Estate Bubble es de t a ea state ubb e • Great Land Bubble?
GLOOMY DOWNERS
• Some “Smart Money Selling Smart Money” • Without Subsidies Ethanol Does Not
Work W k • Ethanol Plants Up 63 Percent in 3 Years • Convulsion in One Part of Real Estate Affects Others
Major Conclusions
• Demand Waned in First Half of 2007 • Values Continued To Escalate • Some Urban Markets Cooling • Credit Crunch?
Haskell Invitational
1. 1 2. 3. 3 4. 5. 6. 7. 8. Palladino P ll di Park Avenue Ball Papi Ch ll P i Chullo Roman Ruler Sun King Scratched Joey P. Chekhov 91 104 89 104 101 90 93
12th Race, Next Post 6:38
Off: 6:11
1 1/8 Miles. 3 Year Olds Stakes Purse: $1,015,000
#
4
Horse
Roman Ruler
Jockey
Bailey J D
Weight
119
Win
4.20
Place
3.00
Show
2.40
5
Sun King
Castellano J J
119
4.00
3.00
2
Park Avenue Ball
Decarlo C P
118
2.60
Times in 5ths:
:232
:473
1:113
1:363
1:494
Times in 100ths: Ti i 100th
:23.54 23 54
:47.72 47 72
1:11.69 1 11 69
1:36.77 1 36 77
1:49.88 1 49 88
Scratched: Golden Man Also ran: Chekhov, Palladio, Papi Chullo and Joey P. Winning Trainer: Baffert Bob - Owner: Fog City Stable $2 $ Exacta (4-5) Paid $ $16.00 $2 Trifecta (4-5-2) Paid $31.20 $1 Superfecta (4-5-2-8) Paid $38.00 $2 Pick 3 (2-2-4) 3 Correct Paid $1,488.00 Pick 3 Pool $67,463 $2 $ Pick 4 ( (3-2-2-4/6) 4 C / ) Correct Paid $ $7,302.00 Pick 4 Pool $257,723
44
MATCHMAKER INVITATIONAL
1. 1 Topiary 2. Love Match 3. Humoristic 4. Spotlight 5. Cat Alert 6. Emerald E i 6 E ld Earings 7. Briviesca 8. Classic Stamp 9. Noble Stella 10. Smart N Classy 89 87 95 92 95 97 88 90 96 93
11th Race, Next Post 6:11
Off: 5:30
1 1/8 Miles (Turf) 3 Year Olds And Up Stakes Purse: $150 000 Miles. $150,000
#
2
Horse
Love Match
Jockey
Castellano J J
Weight
116
Win
56.60
Place
19.60
Show
9.80
5
Cat Alert
Decarlo C P
118
9.20
7.00
6
Emerald Earrings
Lezcano J
116
8.60
Times in 5ths:
:24
:501
1:143
1:382
1:501
Times in 100ths:
:24.19
:50.30
1:14.64
1:38.42
1:50.38
Also ran: Spotlight (GB), Smart N Classy, Classic Stamp, Topiary, Humoristic, Briviesca (GB) and Noble Stella (GER) Winning Trainer: Kimmel John C - Owner: Poulson Anne $2 Exacta (2-5) Paid $522.80 ( ) $2 Trifecta (2-5-6) Paid $3,662.00
46
TEXAS LAND NEXT YEAR ?
• Markets Continue As Is -- Up? • Markets Freeze Up -- Down? • Markets Go Sideways -- No Change? y g
PERSONAL SAVINGS RATE
Source: Department of Commerce
AS A PERCENT OF DISPOSABLE PERSONAL INCOME
DEBT SERVICE PAYMENTS
Source: Federal Reserve Board
MORTGAGE RATES AND TREASURIES
MONTHLY DATA
Source: Federal Reserve Board
CONTINUES AS IS?
• Shortage of Properties • Money, Money, Money • Adjustment To Rising Prices
TEXAS LAND NEXT YEAR ?
• 2003-2007 Average Growth Rate 2003 2007 18 Percent • 2008 -- $2 535 per acre $2,535 • 2010 -- $3,529 per acre
FREEZE UP
• Money Dries Up • Buyers Abandon Market • Inventories Build
GOING SIDEWAYS?
• Buyers Leave Market • Sellers Moderate Asking Prices
TEXAS RURAL LAND VALUES
Dollars per horse
110,000 100,000 90,000 80,000 70,000 60,000 50,000 40,000 40 000 30,000 20,000 10,000 0
19 196 6 6 19 7 196 8 196 9 7 19 0 197 1 197 2 197 3 7 19 4 197 5 197 6 7 19 7 197 8 197 9 8 19 0 198 1 198 2 198 3 8 19 4 198 5 198 6 8 19 7 198 8 198 9 199 0 9 19 1 199 2 199 3 9 19 4 199 5 199 6 9 19 7 98 19 209 9 200 0 0 20 1 200 2 200 3 0 20 4 200 5 06
Source: Real Estate Center Mays Business School Texas A&M University
Dollars per acre 2,000 1,800
Correlation -- 90 5 90.5
Keeneland Yearlings
1,600 1,400 1,200 ,
Texas Land
1,000 800 600 400 200 0
TEXAS RURAL LAND VALUES
Dollars per horse
110,000 100,000 90,000 80,000 2,000 Dollars per acre 2,500
Keeneland Yearlings
70,000 60,000 50,000 40,000 40 000 30,000 20,000 10,000 0
19 196 6 196 7 196 8 196 9 197 0 197 1 197 2 197 3 197 4 197 5 197 6 197 7 197 8 197 9 198 0 198 1 198 2 198 3 198 4 198 5 198 6 198 7 198 8 198 9 199 0 199 1 199 2 199 3 199 4 199 5 199 6 199 7 199 8 209 9 200 0 200 1 200 2 200 3 200 4 200 5 200 6 07
Source: Real Estate Center Mays Business School Texas A&M University
1,500 ,
Texas Land
1,000
500
0
eighteenth annual outlook for texas land markets
april 23-25 2008 san antonio, texas