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The Price and Quantity of Residential Land in the United States

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  • Heathcote, Jonathan
  • Davis, Morris

Abstract

A house is a bundle comprising a physical structure and the plot of land upon which the house is built. Thus changes in house prices reflect changes in the cost of structures and value of land. In this paper we apply this insight to construct the first constant-quality price and quantity indexes for the aggregate stock of residential land in the United States. We document that the value of residential land exceeds annual GDP, and that the dynamics for the prices of residential land and residential structures are quite different. For example, the real price index for residential land almost tripled between 1975 and 2005, while the real price of structures increased by only 24 percent. Fluctuations in house prices at business cycle frequencies, including the recent boom, are primarily driven by changes in the price of land.

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  • Heathcote, Jonathan & Davis, Morris, 2005. "The Price and Quantity of Residential Land in the United States," CEPR Discussion Papers 5333, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5333
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    More about this item

    Keywords

    Housing; Land prices;

    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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