by Republic Ranches | September 3, 2014
Supply & Demand: Land Prices vs. Commodities Needed
Commonly said, and important to remember, regarding rural land values: “They’re not making anymore of it!” Landowners – both buyers and sellers of land in Texas – need only to look at the world of commodities when understanding the price and value of the land they wish to purchase.
The abundance or depletion of commodities: oil, gas, crops, livestock – and, even higher on the list, water – can make or break a real estate transaction; not to mention, alter the market and cause real estate prices to fluctuate drastically. The simplest way to understand commodities and their affects is by understanding the basics: how difficult it is to feed a population that’s growing with a farm/agricultural community that – in turn – must also grow in order to meet the demand.
When something is dwindling, such as the land available for successful farms because of issues ranging from development to dealing with drought conditions – farmland prices increase rapidly. The value of that dwindling farmland becomes monumental.
Rising demand for agricultural commodities raises land values, while at the same time restrictions, drought, and expansion put serious pressure on what farmlands can actually supply. But there are a variety of factors that must also be taken into account. Although new technologies can offer solutions to to increase the ability to produce crops and supply the ever-growing nation to some degree, at the end of the day, those technologies cannot produce more land.
The only everlasting commodity is the land. In Texas, new residents are moving in like wildfire, with statistics stating that at least 13 million residents will be added to the state in the next twenty years…for a whole lot of reasons: more new jobs than the rest of the states combined; a business friendly world; affordable housing; and a landscape so diverse that it literally offers something for everyone. But because of this influx, with the housing industry developing, there will be an even higher demand and higher prices for the land itself. Rural land where people wish to build a house, or a weekend getaway – all will rise in price and the competition will grow.
In conclusion, the Republic Ranches team understands the laws of supply and demand being cornerstones of the American economy. When the demand rises, the value and price of that perfect Texas property rise right along with it as supply is finite for all intents and purposes