Swings in Commercial and Residential Land Prices in the United States

AEI Economic Policy Working Paper 2012-03

63 Pages Posted: 21 Feb 2013

See all articles by Joseph Nichols

Joseph Nichols

Board of Governors of the Federal Reserve System

Stephen D. Oliner

American Enterprise Institute

Michael R. Mulhall

J.P. Morgan Chase & Co.

Date Written: July 31, 2012

Abstract

We use a large dataset of land sales dating back to the mid-1990s to construct land price indexes for 23 MSAs in the United States and for the aggregate of those MSAs. The price indexes show a dramatic increase in both commercial and residential land prices over several years prior to their peak in 2006-07 and a steep descent since then. These fluctuations have exceeded those in well-known indexes of home prices and commercial real estate prices. Because those indexes price a bundle of land and structures, this comparison implies that land prices have been more volatile than structures prices over this period. This result is a key element of the land leverage hypothesis, which holds that home prices and commercial property prices will be more volatile, all else equal, in areas where land represents a larger share of real estate value.

Suggested Citation

Nichols, Joseph and Oliner, Stephen D. and Mulhall, Michael R., Swings in Commercial and Residential Land Prices in the United States (July 31, 2012). AEI Economic Policy Working Paper 2012-03, Available at SSRN: https://ssrn.com/abstract=2215021 or http://dx.doi.org/10.2139/ssrn.2215021

Joseph Nichols

Board of Governors of the Federal Reserve System ( email )

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202-452-2983 (Phone)

Stephen D. Oliner (Contact Author)

American Enterprise Institute ( email )

1150 17th Street, N.W.
Washington, DC 20036
United States
2024195205 (Phone)

HOME PAGE: http://www.aei.org/scholar/stephen-d-oliner/

Michael R. Mulhall

J.P. Morgan Chase & Co. ( email )

60 Wall St.
New York, NY 10260
United States

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