Central Texas Ranch Market Pulse - Q1 2024

If I were to gauge the state of the ranch market in Texas solely based on showing and listing appointments, the consensus among ranch brokers might suggest a robust first quarter. Traditionally, our market gains momentum post-spring break, yet this year witnessed an unexpected spike in activity as early as February. Showings and listing pitches meeting were strong in Q1, hinting at confidence among buyers and sellers. It seems this confidence was felt across the board reflected in various economic indicators: US stocks soared to all-time highs with an 8% year-to-date gain, the job market maintained strength, and sectors like oil, as well as risky cryptocurrency, demonstrated vigor. Despite the increased activity and positive economic signals, the Q1 data reveals we are off to a similar start to what we saw in the first quarter of 2023. Let us delve into the data to gain a clearer understanding of how these factors affected certain categories and how they may affect the following quarters.

Gillespie, Blanco, Burnet Submarket (Western)

The Western submarket exhibited a positive performance throughout the first quarter, but with a shift in preferred price points compared to Q4. The $1-2M category was a surprising frontrunner after the quiet fourth quarter in this category. The 1st quarter experiencing nearly a twofold increase in activity, with seven transactions recorded primarily closing in March. Buyer confidence in this segment remains notably higher across both the Western and Eastern submarkets. The $2-5M category was intriguing, seven properties entering into contracts in February. However, only four resulted? in transactions during the Q1 marking a slight dip from Q4. Despite initial activity in Q1. These pending properties will most likely impact Q2 if they make it through due diligence.

In the $5M+ category, only two transactions were recorded, surprising given the robust performance witnessed in Q4. Noteworthy properties listed towards the end of Q4 and the beginning of Q1 may have been overshadowed by the strong start of the US stock market, potentially diverting attention from this segment. Nevertheless, I maintain optimism that this sector will see a healthy number of transactions, provided sellers remain realistic in their pricing strategies.

In the Western submarket, inventory levels experienced growth across all three categories. Particularly noteworthy was the significant uptick in the $5M+ market, boasting a roughly 50% increase in new listings. This surge may have prompted prospective buyers to adopt a slower approach, delaying decisions as they await more potential spring launches.

Moreover, recent entries in the $5M+ category debuted with ambitious price tags, which I observed price adjustments after only several months. While the $2-5M listing inventory observed a marginal uptick following a modest decline in the fourth quarter of 2023, the $1-2M category continued its upward trajectory in inventory levels. Given the heightened sales activity witnessed in the first quarter within the $1-2M category, it becomes imperative for sellers to adopt data-aligned pricing strategies to capitalize on the increased market activity.

Bastrop, Lee, Milam Submarket (Eastern)

In the Eastern Submarket, the $1-2M category reported a 17% increase in sales from Q4 2023 to Q1 2024. It is intriguing we only saw 5% increase in inventory though, I would have speculated more sellers would have entered the market with the reports of increased activity. The $2-5M category remained very quiet in the 1st quarter, although four properties within this range entered into contracts during February and March. From reviewing the listing it seems that many of the pending sales comprise properties with subdividing potential. Could we be seeing interest again from these types of buyers who had been relatively dormant in 2023? These transactions often entail prolonged processes involving feasibility studies, with some anticipated to materialize in the second quarter as investors foresee an upswing in the ranchette market. While buyers may be monitoring Federal Reserve news regarding interest rates, I feel that the economic indicators may be contribute to rural subdividers’ confidence. As for the $5M+ category, first-quarter sales data remained subdued, with no transactions reported. However, anecdotal evidence suggests ongoing activity, with two off-market properties pending in this category, including one I am personally involved with. Based on this experience, I am aware there are buyers actively searching at this price point but are price consciences and also feel they have limited inventory to review.

In the Eastern submarket, there was minimal new inventory entering the market during the first quarter. Although the $1-2M range saw a modest 5% increase in inventory, this uptick failed to offset the supply reduction resulting from a 17% increase in sales within this category. I find it surprising, considering the heightened buyer activity, more sellers did not emerge in the spring market. Meanwhile, the $2-5M category experienced a 9% reduction in inventory, and the $5M+ category saw a substantial 21% decrease. The question arises: if there were no sales in these categories, where did the properties go?

It appears that the reduction can be attributed to properties being withdrawn from the market or listing agreements not being renewed. Upon reviewing previous listings, it is evident that sellers were willing to adjust their prices. However, slow showing activity and suggested price adjustments falling short of expectations could have contributed to this trend. As mentioned earlier, buyer interest persists in these categories, although with a keen eye on pricing. It appears that buyers are particularly price-conscious and are waiting for prices to stabilize further before making significant investments.

Conclusion

My initial impressions based on showing and listing appointments suggested a strong quarter, a deeper dive into the data uncovers a mostly subdued first quarter. That being said, the strength of the economic factors we have seen lately should flow into our market at some point, especially those related to the oil markets if they hold pace. As we saw in the 2023 data, I am optimistic we will see the ranch market pick up steam as the year progresses. The Texas A&M real estate center also recently released adjusted predictions for 2024, indicating they feel transactions should pick up pace as the year goes on. As I anticipate this, what are some good practices I am suggesting for buyers and sellers currently in the market? For sellers, studying sales data before listing and remaining receptive to buyer feedback throughout the process is crucial for adjusting strategies accordingly. I continue to see sellers secure fair prices aligned with historical yearly price appreciation for rural land. For buyers, while no significant dip in values is anticipated, historical trends suggest a plateau or slight dip after robust runs. I believe we have seen that play out, at least in the Eastern submarket this past year. Thus, if the right property presents itself, prospective buyers should attempt to negotiate, leveraging market data to inform valuation decisions. Many sellers have exhibited a willingness to engage in negotiation, facilitating mutually beneficial transactions for both parties involved.