The Price and Quantity of Residential Land in the United States

39 Pages Posted: 5 Jan 2006

Multiple version iconThere are 2 versions of this paper

Date Written: November 2005


A house is a bundle comprising a physical structure and the plot of land upon which the house is built. Thus changes in house prices reflect changes in the cost of structures and value of land. In this paper we apply this insight to construct the first constant-quality price and quantity indexes for the aggregate stock of residential land in the United States. We document that the value of residential land exceeds annual GDP, and that the dynamics for the prices of residential land and residential structures are quite different. For example, the real price index for residential land almost tripled between 1975 and 2005, while the real price of structures increased by only 24 percent. Fluctuations in house prices at business cycle frequencies, including the recent boom, are primarily driven by changes in the price of land.

Keywords: Housing, land prices

JEL Classification: R14, R21, R31

Suggested Citation

Davis, Morris A. and Heathcote, Jonathan, The Price and Quantity of Residential Land in the United States (November 2005). CEPR Discussion Paper No. 5333, Available at SSRN:

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


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