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Swings in commercial and residential land prices in the United States

Author

Listed:
  • Stephen D. Oliner

    (American Enterprise Institute)

  • Joseph B. Nichols

    (American Enterprise Institute)

  • Michael R. Mulhall

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 2006-07 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.

Suggested Citation

  • Stephen D. Oliner & Joseph B. Nichols & Michael R. Mulhall, 2012. "Swings in commercial and residential land prices in the United States," AEI Economics Working Papers 16021, American Enterprise Institute.
    • Handle: RePEc:aei:rpaper:16021
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    JEL classification:

    • A - General Economics and Teaching

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