One can conceptualize a house as a bundle comprising a reproducible tangible structure and a non-reproducible plot of land. When the value of a home is decomposed this way, land capitalizes the market value of a home's location. We develop a formal relationship between the dynamics of house prices, structures costs and land prices, and thereby construct the first constant-quality price and quantity indexes for the aggregate stock of residential land in the United States. In a range of applications we show that these series can shed light on trends, fluctuations and regional variation in the price of housing.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics
- House prices
- Land prices
- Land value