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Land Prices & the Property Bubble


               
2005 Aug 25, 1:03pm   12,925 views  126 comments

by HARM   follow (0)  

Per GreenCanopy's request:

Several here emphasize housing as an investment, shorn of mystique, a place to put money. While this a simplified picture, it is analysis-friendly. Treating housing as an asset class leads to a couple of interesting questions (–> topics?): To what degree can we understand the ‘bubble’ as herd-mentality asset rotation, and how can we further decompose the asset class called ‘housing’.

I like the second one first, because it has more to suggest for what types of property might do well during a deflation. Housing decomposed as Land+(Bricks+Sticks)+Labor+Regulation vs the MacroEc variables. What you haven’t covered (or I’ve missed) is an opinion on land prices and their behavior within the property bubble. Should they behave similarly?

Things to consider:

  • Higher housing supply = More available houses, but less attractive land. No, we’re not really running out of land, but is there enough of a perception to preserve a mania?
  • The NAAVLP phenomena applies much less to lots, as applications for land mortgages and construction loans are examined quite rigorously (simultaneously fogging two mirrors…). Perhaps speculation is as rampant with land, but could the landowner be less forced to run for the exits? Also, the tax burden is lower on unimproved land.
  • Study One, Bank of Canada, emphasizes land’s importance in housing appreciation:
    The Price and Quantity of Residential Land in the U.S. http://tinyurl.com/dpx6u
  • Study Two, Cato, emphasizing regulation’s importance in housing appreciation:
    Zoning’s Steep Price http://tinyurl.com/dhng5

    • Thoughts?

    #housing

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    126   praetorian   2005 Aug 28, 7:24am  

    “the needs of the many outweigh the needs of the one.”

    Here's the great thing about the internet: He can start his own blog, and put out his message for all to consider. Not only that, he can turn on comments, and he can link to posts here, posting counter-arguments.

    So, he get's a forum for his viewpoints, and we don't have to do bayesian a**hole filtering when reading threads here. And, if the fancy strikes us, we can head over to his place to see his arguments.

    Really, it's a win-win.

    Cheers,
    prat

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