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Texas Land Investment 101

Posted by: In: Newsletter 15 Sep 2011 Comments: 0

By Jim Hynes

Managing Director                                                                                                                            

We have been traveling the country these past months making the case for investing in Texas land.  Obviously we are biased, but when you step back and look at the two basic criteria of any investment decision – supply and demand – Texas land is a very compelling investment.

As illustrated in the graph below, prepared by our third party economist at Metrostudy, Texas land is currently at a point where most investors dream of – the bottom of the barrel for supply with demand still increasing at a rapid pace.

index

The supply side of the equation, depicted by the black and red lines, shows vacant lots delivered and then absorbed by builders for residential construction.  It reveals that these lines are not only highly correlated with each other, but also with population.  In 2006, there was a significant drop in supply due to the national mortgage meltdown and inability of home builders and buyers to get loans.  Then in 2008 these metrics inverted, resulting in the unique situation of more land being absorbed by builders for new homes than lots being delivered – an incredible shortage of supply!

The demand side of the equation denotes the state’s population increasing each year over the past decade and how it is projected to continue through 2015 and beyond.  You would think from the graph that millions of people just packed up and moved out of Texas, but it was not the case – the growth has not slowed down one bit, resulting in a pent-up demand for quality land.

We are very confident that land will return to its historical correlation levels with the explosive population growth in Texas.  These fundamentals are at the core of our investment strategy – opportunistically buying well-located land sites from distressed sellers

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