The Price of Residential Land in Large U.S. 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 U.S. 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 U.S. 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 the future course of home prices-their average rate of appreciation and their volatility-is likely to be determined even more by the course of land prices than used to be the case.

The Geographic Determinants of Housing Supply*

“…Substituting back into the supply equation, we obtain the equilibrium average price Davis and Palumbo (2008) suggest national and metropolitan land shares to be very similar. We therefore adapt an unweighted average 20% land share across metropolitan areas in 1970.…”

“…P k is measured by median housing prices in each decennial Census. 9 The city-specific parameter σ k (construction cost share in 1970) is calculated using the estimates in Davis and Heathcote (2007) and Davis and Palumbo (2008) and data on housing prices. Combined with existing detailed information about the growth of construction costs in each city from published sources, the cityspecific intercept σ k · ln CC is thus known and calibrated into the model.…”

Recent spatial growth dynamics in wages and housing costs: Proximity to urban production externalities and consumer amenities

“…As indicated in the empirical section, because we measure unit housing prices and not land prices, we re-express Equation (6) in terms of housing prices. Following the hedonic quality-oflife literature (e.g., Beeson and Eberts, 1989), and empirically supported by Davis and Palumbo (2008), we assume that differentials in housing prices relate to land price differentials and not to differences in replacement costs of structures: P h =rT h /h, where P h is the unit price of housing and h denotes quantity of housing units. Substituting the log differential of the expression for the unit price of housing into the log differential of Equation (6), and using the full employment equilibrium conditions for labor and land, yields the following…”

Development and Wealth: A Georgist Perspective

“…Because neoclassical economics conflates land with man‐made capital to comprise a two‐factor theory, capital appreciation of real property is likely to be more in land than not. This becomes even more apparent when one realizes that buildings typically depreciate from 0.5 percent to 1.5 percent yearly (Davis and Palumbo 2006), and capital equipment—motor vehicles, computers, and factory equipment—can typically be written off entirely in an even shorter time period. Peruvian economist Hernando de Soto (2000) has received a good deal of recent acclaim for arguing that improved titling of real estate in developing nations would substantially improve economic growth.…”