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Swings in commercial and residential land prices in the United States

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

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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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
DOI: 10.1016/j.jue.2012.06.004
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

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