The price of residential land in large US cities

Abstract

Combining data from several sources, we build a database of home values, the cost of housing structures, and residential land values for 46 large US metropolitan areas from 1984 to 2004. Our analysis of these new data reveal that since the mid-1980s residential land values have appreciated over a much wider range of cities than is commonly believed. And, since 1998, almost all large US cities have seen significant increases in real residential land prices. Averaging across the cities in our sample, by year-end 2004, the value of residential land accounted for about 50 percent of the total market value of housing, up from 32 percent in 1984. An implication of our results is that housing is much more land intensive than it used to be, meaning that the future course of home prices-the average rate of appreciation and volatility-is likely to be determined even more by demand factors than was the case even ten or twenty years ago.

The housing stock, housing prices, and user costs: the roles of location, structure and unobserved quality

“…Furthermore, we use repeated cross-sections sampled from periods of both housing price decline and boom in England and find that the estimated relationship between physical attributes, selection and rent-to-price remains very stable. We find that recent movements in the rent-to-price ratios of housing are reflected entirely in the value of land, 4 which is consistent with the methods and findings in Davis and Heathcote (2007), Davis and Palumbo (2008), and Amior and Halket (2014). Taking this one step further, if we assume that a single risk-adjusted discount rate prices all housing in the market as in Epple et al (2013), then we can say more.…”

“…Therefore most of the medium to high frequency variation in prices and rents over time in our data is captured by changes in the value of location (i.e. land) and not in the valuation of dwelling type or size, consistent with findings throughout the housing literature (Davis and Heathcote (2007); Davis and Palumbo (2008); Amior and Halket (2014)). …”

Land use regulations and the value of land and housing: An intra-metropolitan analysis

“…In order to explore the link between individual house values and land, prices we use the simple framework emphasized by Davis and Palumbo (2008) [10] [10] in which the value of any house (V i ) is simply the sum of the physical capital embedded in that house (K i ) and the land it occupies (L i ), where stocks of capital and land are valued at current prices (p k , p l ):…”

“…Fig. 3 reports an aggregate index of land prices derived by holding constant the economic geography and the condition of the individual land parcels, and compares this to the index published by Davis and Palumbo (2008). We also compare the land price index to the home price index produced by Case-Shiller for the Bay Area, using repeat sales of single-family housing, 22 and the construction cost index produced by the Bureau of Economic Analysis.…”

“…Section 4 relates variation in land prices to our intra-urban measures of economic geography, and Section 5 investigates variation in local regulation and land prices within the metropolitan region. In Section 6, which analyzes the relation between housing values and land values, we make the linkage to the work by Saiz (2010) and Davis and Palumbo (2008) more explicit, and we note the complementarity in approaches. Section 7 is a brief conclusion.…”