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House prices and land prices under the microscope: a property-level analysis for the Washington, DC area

Author

Listed:
  • Edward J. Pinto

    (American Enterprise Institute)

  • Stephen D. Oliner

    (American Enterprise Institute)

  • Morris A. Davis

    (American Enterprise Institute)

Abstract

In this paper, we use a new property-level dataset to estimate the price of land since 2000 for nearly 600,000 detached single-family homes in the Washington, DC metro area. We employ these estimates to characterize the recent boom/bust cycle in land prices and house prices in the Washington area at a fine level of geography. The data show that land prices were more volatile than house prices everywhere, but especially so in the areas where land was inexpensive in 2000. In those areas, the land share of property value jumped during the boom, and this rise in the land share was a useful predictor of the subsequent crash in house prices. These results highlight the value of focusing on land for assessing house-price risk. In ongoing work, we are exploring how much of the spatial variation in land-price changes can be linked to high-risk mortgage lending and fundamentals such as housing rents, income growth, and employment.

Suggested Citation

  • Edward J. Pinto & Stephen D. Oliner & Morris A. Davis, 2014. "House prices and land prices under the microscope: a property-level analysis for the Washington, DC area," AEI Economics Working Papers 415524, American Enterprise Institute.
    • Handle: RePEc:aei:rpaper:415524
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    References listed on IDEAS

    as
    1. C. Sirmans & Barrett Slade, 2012. "National Transaction-based Land Price Indices," The Journal of Real Estate Finance and Economics, Springer, vol. 45(4), pages 829-845, November.
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    More about this item

    Keywords

    Housing finance; US Housing Market; Housing Center: Research;
    All these keywords.

    JEL classification:

    • R - Urban, Rural, Regional, Real Estate, and Transportation Economics

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