Land and Property Values in the U.S.

The databases available here contain information on the values and rents of residential properties in the United States and cover four dimensions:

• 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;
• Values of homes, structures, and land in residential use, and land and home price indexes for 50 states and the District of Columbia; and
• Values and price indexes for land, structures, and housing for single-family owner-occupied housing units in 46 major U.S. metropolitan areas.

A key aspect of these data is their provision of separate price indices for land and structures, in addition to the more common price indices for property (land and structures combined).

A house is a long lived asset that produces a flow of housing services each year, and the market price of these services is the annual rent.  The ratio of rent to price for a house is analogous to a dividend yield (the ratio of an annual dividend to the price of a stock or bond).  Under certain assumptions, house prices are equal to the expected net present value of housing rents, including the expected growth in rents. When the rent to price ratio declines (as it did over the 1997-2006 housing boom), either the discount rate on housing rents has fallen, the expected growth rate of housing rents has increased, or both have occurred.

Price indexes and values of land inform the analysis of trends and cycles in house prices.  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 not simply a manufactured good. Housing has a valuable location component, and good locations are often scarce. If construction costs do not rise 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 ("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.

Although the rent to price ratio and the price and value of land are obvious metrics for understanding dynamics of housing and house prices, few of these data can be directly observed. In the case of the rent to price ratio, the implicit rents accruing to homeowners are not observed and 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 data here have been created by Morris A. Davis and his co-authors. Davis, who maintains and updates the data, is an assistant professor at the University of Wisconsin School of Business, Department of Real Estate and Land Economics, and a fellow at the Lincoln Institute of Land Policy.