The Price and Quantity of Residential Land in the United States

54 Pages Posted: 28 Sep 2004

Multiple version iconThere are 2 versions of this paper

Date Written: July 2004

Abstract

We combine publicly available data from Freddie Mac, the Decennial Census of Housing, and the Bureau of Economic Analysis to construct the first constant-quality aggregate price index for the stock of residential land in the United States. We uncover five main results: (a) since 1970, residential land prices have grown faster but (b) have also been twice as volatile as existing home prices; (c) averaged from 1970 to 2003, the nominal stock of residential land under 1-4 unit structures accounts for 38% of the market value of the housing stock and is equal to 50% of nominal annual GDP; (d) the real stock of residential land under 1-4 unit structures has increased an average of 0.6% per year since 1970; and (e) residential investment leads the price of residential land by three quarters. We also estimate that in 2003:Q3 the nominal value of the entire stock of residential land is the same as annual GDP. Finally, we show for the US data that the logarithms of the nominal price index for residential land, disposable income, and interest rates are cointegrated.

Keywords: Land, housing, house prices, land prices

JEL Classification: E0, E30, R0, R14

Suggested Citation

Davis, Morris A. and Heathcote, Jonathan, The Price and Quantity of Residential Land in the United States (July 2004). Available at SSRN: https://ssrn.com/abstract=596462 or http://dx.doi.org/10.2139/ssrn.596462

Morris A. Davis (Contact Author)

Rutgers Business School ( email )

Rutgers Business School
One Washington Park #1092
Newark, NJ 07102
United States

Jonathan Heathcote

Minneapolis Fed ( email )

90 Hennepin Avenue
Minneapolis, MN 55480
United States

HOME PAGE: http://www.jonathanheathcote.com

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