Ranch Economist Dr. Charles E. Gilliland - Texas A&M University

Prominent Ranch Economist Forecasts Muted
Texas Rural Land Price Increases in 2017

As Texas personal incomes go, so go Texas ranch sales and rural land prices.
 
As such, Dr. Charles E. Gilliland, the noted research economist with the Real Estate Center at Texas A&M University, forecasts that ranch prices should continue to rise in 2017, although not as rapidly as in they did in the robust years of 2014 and 2015.
 
The outlook for ranch prices is one of several topics that Dr. Gilliland and I discussed during a recent conversation we recorded for RANCHCAST with LEM LEWIS, my new audio podcast designed to showcase the vital contribution that America’s ranchers make to our nation’s economy, and to provide ranchers insights and practical advice available nowhere else.
 
I have seen Dr. Gilliland speak at a variety of forums over the years and I read his book, Buying Rural Land in Texas. But having the chance to tap directly into his encyclopedia-like reservoir of knowledge on Texas and its economy was a special treat. I asked Dr. Gilliland questions that are on my mind, as well as some I frequently hear from my ranch clients.
 
While complete results for this year are not yet available, Dr. Gilliland says that “2016 prices look like they’re slowing down,” adding that “2017 will be a continuation of increasing prices but maybe at a slower level of increase than we saw in the 2014 and 2015-time frame.”

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Prominent Ranch Economist Forecasts Muted
Texas Rural Land Price Increases in 2017

By Lem Lewis
The Ranch Broker

As Texas personal incomes go, so go Texas ranch sales and rural land prices.
 
As such, Dr. Charles E. Gilliland, the noted research economist with the Real Estate Center at Texas A&M University, forecasts that ranch prices should continue to rise in 2017, although not as rapidly as in they did in the robust years of 2014 and 2015.
 
The outlook for ranch prices is one of several topics that Dr. Gilliland and I discussed during a recent conversation we recorded for RANCHCAST with LEM LEWIS, my new audio podcast designed to showcase the vital contribution that America’s ranchers make to our nation’s economy, and to provide ranchers insights and practical advice available nowhere else.
 
I have seen Dr. Gilliland speak at a variety of forums over the years and I read his book, Buying Rural Land in Texas. But having the chance to tap directly into his encyclopedia-like reservoir of knowledge on Texas and its economy was a special treat. I asked Dr. Gilliland questions that are on my mind, as well as some I frequently hear from my ranch clients.
 
While complete results for this year are not yet available, Dr. Gilliland says that “2016 prices look like they’re slowing down,” adding that “2017 will be a continuation of increasing prices but maybe at a slower level of increase than we saw in the 2014 and 2015-time frame.”
 
Dr. Gilliland, who himself grew up on a cattle ranch, concentrates his research on appraisal issues, development issues, property rights, rural land markets, property taxation, and water marketing.
 
POPULATION, JOB, and WAGE GROWTH
 
More than oil prices and interest rates, Dr. Gilliland finds that ranch land values in Texas are tied to population, job, and wage growth.
 
“Interest rates don’t seem to have much of a correlation with what goes on with the land prices from a statistics standpoint, as you might expect that they would,” he says.
 
In July 2016, Dr. Gilliland’s Real Estate Center colleagues, Luis B. Torres and Wayne Day, reported that Texas personal income per capita (PIPC) – after lagging the national averages in recent years – “has converged with and exceeded U.S. PIPC as a result of increasing income within the state.”
 
That helps to explain the overall buoyancy of Texas ranch land prices.
 
Yet not all regions of Texas are enjoying equal growth. Dr. Gilliland notes that the Central Hill Country, from the area bounded by San Antonio and Austin and Waco and out west by the Junction, has seen fairly strong ranch prices.
 
“They have increased pretty well all the way through 2016, and they are essentially being fueled by the general level of economic activity in other parts of the state as people continue to look for recreational properties and opportunities,” he says.
 
In contract, the region that stretches from the northern part of the Panhandle down to the Midland area is more closely tied to the agricultural economy. With commodity prices being in retreat, “the prices are still holding up, but we have seen some evidence that there’s been a slowdown in the level of transactions up there,” Dr. Gilliland says.
 
FLASHING CAUTION LIGHTS AHEAD
 
Among the indicators that the pace of growth may continue to slow into 2017, Dr. Gilliland cites the current decline in the number of total land transactions and the number of acres involved – even though the prices for those transactions have not yet softened appreciably. 
                                                                                                                                      
Historically, a decline in total land transactions and acres – although not infallible predictors – are among “the things that happen before there is a pullback on a broad basis,” Dr. Gilliland notes.
 
“I wouldn’t say that we’re seeing a red light, but there may be flashing caution lights ahead at this point,” he says, quickly adding that “we don’t have the kind certainty in what we’re looking at to make that kind of a call at this point.”
 
Looking beyond 2017 is, obviously, even harder to forecast.  Nonetheless, as the expression goes, trees don’t grow to the sky, and Dr. Gilliland thinks it’s reasonable to anticipate that by 2020, or in that time frame, the state and ranch economies will see a correction. 
 
“The expansion’s been going on a long time, so more and more, economists are becoming worried that we’re liable to see a recession in the next three or four years,” Dr. Gilliland acknowledges.
 
INFLUX of FOREIGN INVESTORS
 
Two trends that are likely to continue and will impact ranch land prices for the foreseeable future are the conversion of working ranches – previously used for cattle and agriculture – to properties used primarily for recreation and wildlife preservation; and an influx of foreign investors.
 
Dr. Gilliland says that the Real Estate Center does not track hard numbers on the rate of ranch land conversions, but he feels confident that it’s a “significant” number. “It’s a changing world out there in the countryside,” he says.
 
While Dr. Gilliland would not describe the volume of foreign investment in Texas ranch properties as a flood, he does believe the volume has been significant enough to prop up what would have otherwise been “a fairly weak” market in the cropland sector of the market. 
 
As a ranch broker, I’m partial, of course.
 
But I especially like what Dr. Gilliland had to say about those people who fret over the various economic fluctuations that influence the sales prices of Texas rural real estate. The key, he explained, is to buy a property for the right price in the first place [Which is why working a talented and knowledgeable ranch broker is crucial].
 
“I can’t remember who it was that had made the observation, but they said, ‘You have made your money when you buy the property.’ There is basically not much you can do after that to ensure that it’s going to be a good investment,” Dr. Gilliland told me.

​If you’re considering a ranch purchase or sale, I invite you to contact me for a no-obligation consultation. I stand at the ready to answer all of your ranch-related real estate questions.
 
For additional information, I also refer you to my popular “Ask Lem” video series that provides ranch buyers and sellers answers to some of the most common ranch-related real estate questions. Each “Ask Lem” video runs about two minutes in length and is available on YouTube at http://tinyurl.com/LemLewisVideos 
 
And be sure to stay tuned for upcoming editions of my new audio program, RANCHCAST, which will include my conversation with Dr. Gilliland. I’ll have more details about this exciting new ranching resource soon.