Modeling Influence of Agricultural and Non-Agricultural Factors on Texas Rural Land Market Values

Rural land provides physical qualities that affect agricultural production, and space, rural culture, and biodiversity to non-agricultural entities. Texas rural land values have increased substantially in recent years, expanding transactions and prices received. The increase of land price caused expansion of related business operations. Therefore, concerns of volatilities in land price put finding the determinants of land value at the forefront of research. Land use patterns in Texas are numerous as much as they are complicated in terms of interactions and pricing. Therefore, rural land values are determined by factors that differ from the conventional belief that farm income drives values. Identifying alternative determinants of price enables practitioners to make informed decisions. Using county level data, this study estimates a comprehensive spatial panel hedonic model to discover determinants of rural land prices in Texas. Both county-level variation across multiple periods and spatial contribution to the price variability measured by a spatial weighted matrix are considered. The results show that besides the modest influence of traditional farm returns, non-farm factors are crucial in determining Texas rural land values.