Zone-tailed Hawks are relatively uncommon and not all that well studied. In the US you can find these guys in various parts of Arizona and New Mexico, and in Southern and West Texas. If you're not really sure what you're looking at, you might mistake these guys for a Turkey Vulture at first glance. They've got similar flight styles. So if you're in their range, you should do some double takes, because Z-taileds are pretty sweet. Look for the white(ish) bands under the tail when in flight. Their vocalizations are pretty telling as well.
In the Hill Country, they nest in oak-juniper woodlands. I've found them nesting in huge Cedar Elms and Sycamores, not necessarily by year-round water sources though. Like many raptors, they will use old nest sites. They hunt in open grasslands.
The first four photos are from the same nest (2012 nest). First photo is the male, second photo is the female on the nest in May (in a Cedar Elm). Third and fourth photo is one of two nestling/fledglings- both fledged (taken in early July). The last photo is a different nest, in a sycamore. The nest was really exposed. (The pair nested ~100 meters away in 2011). Both birds fledged. This photo is from late June, 2012.