Because land and structures are so inexorably blended in the U.S., pinpointing the value of land is a difficult task. Morris A. Davis, assistant professor of real estate and urban land economics at the Graaskamp Center for Real Estate at the Wisconsin School of Business and a fellow at the Lincoln Institute of Land Policy, has made the task easier with a new online database that provides separate price indices for land and structures. Land and Property Values in the U.S. provides data sets covering the ratio of rents to prices for the stock of all owner-occupied housing; values and price indexes for all land, structures, and housing in residential use; and values and price indexes for land, structures, and housing for single-family owner-occupied housing units in 46 major U.S. metropolitan areas.
“Price indexes and values of land inform the analysis of trends and cycles in house prices,” says Davis, who tells the story of how he created the data sets here. “If housing were simply a manufactured good, and location or land had no value, then the price of housing would be determined by construction costs, and housing prices would increase at roughly the same rate as the price of other goods in the US economy.” But housing is on land with a specific location, and good locations are often scarce and valuable. If construction costs rise slowly over time and desirable locations are in limited supply, increases in the demand for housing can translate directly to increases in the price of good locations – the land – and in house prices. Accordingly, information on changes in the price and value of land over time often relate to trends and cycles in housing demand.
Few of these data can be directly observed. In the case of the rent-to-price ratio, the implicit rents accruing to homeowners must be estimated based on market rents of similar rental units. In the case of land, direct land sales are rarely observed in built-up areas and occur mainly where new suburban development occurs. To estimate the value of land in built-up areas requires separating the directly observed sale price of housing into the underlying values of the housing structure and the land, neither of which is separately observed.
The online database provides disaggregate estimates of property value for real estate analysis, and will be a useful tool for researchers analyzing housing trends. The data sets can be found in the Databases section of Resources and Tools at www.lincolninst.edu.