Keywords: Land, housing, house prices, land prices
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.
Full paper (425 KB PDF)
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Last update: June 30, 2004