The great land price swing
Lenders and investors beware: Land is a very risky asset

Department of Energy

Article Highlights

  • Land is essential for all types of economic activity - every business has a footprint.

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  • At the height of the 2006 real estate boom, land in the US is estimated to have been worth more than $17 trillion.

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  • Research presented by @AEI’s Stephen Oliner suggests that land is indeed a high-risk investment.

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Land is essential for all types of economic activity. Every business — whether it’s General Motors or the corner grocery store — has a footprint. The same is true for the homes and apartments in which people live.

Land also constitutes a major part of wealth. At the height of the real estate boom in 2006, land in the United States (excluding farmland and land held by the government) is estimated to have been worth more than $17 trillion. This figure represents about 40 percent of the value of commercial real estate and housing in the United States.1 Of course, much of that wealth dissolved over the next few years as real estate markets crashed. The new research presented in this Letter documents the huge swing in land value over the recent cycle, showing that land is indeed a high-risk investment.

Read the full text of the letter here.




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About the Author


Stephen D.
  • Stephen D. Oliner is a resident scholar at the American Enterprise Institute (AEI) and a senior fellow at the University of California, Los Angeles (UCLA) Ziman Center for Real Estate.

    Oliner joined AEI after spending more than 25 years at the Federal Reserve Board. An economist by training, Oliner held a number of high-level positions at the Fed and was closely involved in the Fed's analysis of the US economy and financial markets. Since leaving the Fed, Oliner has become well known for his analysis of US monetary policy and has maintained an active research agenda that focuses on real estate issues and the US economy’s growth potential.  He is coprincipal developer of the AEI Pinto-Oliner Mortgage Risk, Collateral Risk, and Capital Adequacy Indexes.

    Oliner has a Ph.D. and an M.S. in economics from the University of Wisconsin. He received a B.A. in economics from the University of Virginia.

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