The Price of Residential Land in Large U.S. Cities

39 Pages Posted: 10 Nov 2006

See all articles by Morris A. Davis

Morris A. Davis

Rutgers Business School

Michael Palumbo

Board of Governors of the Federal Reserve - Flow of Funds Section; University of Houston - Department of Economics

Date Written: June 2006

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.

Keywords: Home prices, land prices, construction costs, value of residential land, metropolitan areas

JEL Classification: E0, R0

Suggested Citation

Davis, Morris A. and Palumbo, Michael G., The Price of Residential Land in Large U.S. Cities (June 2006). FEDS Working Paper No. 2006-26, Available at SSRN: https://ssrn.com/abstract=943771 or http://dx.doi.org/10.2139/ssrn.943771

Morris A. Davis (Contact Author)

Rutgers Business School ( email )

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

Michael G. Palumbo

Board of Governors of the Federal Reserve - Flow of Funds Section ( email )

Washington, DC 20551
United States
202-452-2296 (Phone)

University of Houston - Department of Economics ( email )

Houston, TX 77204-5882
United States

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