The Value of Land in the United States

In this paper, Karl E. Case presents a brief discussion of the conceptual problems of valuing land and alternative approaches to measurement. Then he estimates the value of land in the United States between 1975 and 2005 using a variety of independent data sources, but relying heavily on the extensive work carried out by the U.S. Census Bureau and the Bureau of Economic Analysis (BEA) in support of the National Income and Product Accounts (NIPA) and the Federal Reserve Flow of Funds Accounts (FOF).

Analyzing the historical trend of land values, Case contends that the total value of developed residential and non-residential plus agricultural real estate increased over that period from $3.7 to $34.7 trillion—a nominal increase of nearly tenfold. This figure is significant, Case argues, in comparison with the $40 trillion in financial wealth held by households. In 2005 land value alone accounted for 31 percent of the total real estate value, increasing from $735.8 billion in 1975 to $10.8 trillion in 2005. Case also reports his estimates of land values for owner-occupied houses, residential property, and non-residential real estate. Land values for all property types grew as fast as the values of the structure and land combined.

The analysis shows that land values still constitute a significant share of national wealth in the United States. These results demonstrate that significant increases in real estate value stemmed from land value increments. Another finding was that the West Coast and Northeast land values rose and fell more than the rest of the country during both the economic upturns and recessions. In view of these findings, Case predicts that land rents will continue to play an important role in determining property prices and real estate investment.

He cautions that the previous recessions in 1980’s and 1990’s were heavily influenced by investment in real estate and consumer spending.The record levels of new housing starts and sales at the end of the study period contributed to record employment and projected reversal of the real estate bubble would result in sharp declines in prices and housing related employment. Case shows that land values are a major portion of property values which are affected by overall price volatility of real estate investment markets.

This paper was presented at the Lincoln Institute’s annual Land Policy Conference in 2006 and is Chapter 6 of the book Land Policies and Their Outcomes.