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Swings in commercial and residential land prices in the United States

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  • Nichols, Joseph B.
  • Oliner, Stephen D.
  • Mulhall, Michael R.

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 2006–2007 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.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 73 (2013)
Issue (Month): 1 ()
Pages: 57-76

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Handle: RePEc:eee:juecon:v:73:y:2013:i:1:p:57-76

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Web page: http://www.elsevier.com/locate/inca/622905

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Keywords: Land; Prices; Commercial; Residential; United States; Volatility;

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Citations

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Cited by:
  1. Kok, Nils & Monkkonen, Paavo & Quigley, John M., 2014. "Land use regulations and the value of land and housing: An intra-metropolitan analysis," Journal of Urban Economics, Elsevier, Elsevier, vol. 81(C), pages 136-148.
  2. Jing Wu & Joseph Gyourko & Yongheng Deng, 2013. "Is There Evidence of a Real Estate Collateral Channel Effect on Listed Firm Investment in China?," NBER Working Papers 18762, National Bureau of Economic Research, Inc.
  3. Xudong An & Yongheng Deng & Joseph Nichols & Anthony Sanders, 2013. "Local Traits and Securitized Commercial Mortgage Default," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 47(4), pages 787-813, November.
  4. Zheng Liu & Jianjun Miao & Tao Zha, 2013. "Land Prices and Unemployment," NBER Working Papers 19382, National Bureau of Economic Research, Inc.
  5. Burge, Gregory, 2014. "The capitalization effects of school, residential, and commercial impact fees on undeveloped land values," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 44(C), pages 1-13.
  6. Huang, MeiChi, 2014. "Bubble-like housing boom–bust cycles: Evidence from the predictive power of households’ expectations," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 54(1), pages 2-16.

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