Land Leverage: Decomposing Home Price Dynamics

26 Pages Posted: 24 May 2007

See all articles by Raphael W. Bostic

Raphael W. Bostic

Federal Reserve Bank of Atlanta

Stanley D. Longhofer

Wichita State University - W. Frank Barton School of Business

Christian L. Redfearn

University of Southern California - Sol Price School of Public Policy

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Abstract

This article demonstrates the importance of separating the bundled good of housing into land and improvements, arguing that changes in a property's overall value will depend critically on how much of its total value is contained in the land, a proportion we call land leverage. The importance of this deconstruction is demonstrated by highlighting how land leverage helps to explain variation in house price appreciation in Wichita, Kansas. Noting that land leverage should be relevant for many real estate issues and policies, we highlight four specific areas where consideration of land leverage could significantly improve our understanding of real estate markets.

Suggested Citation

Bostic, Raphael W. and Longhofer, Stanley D. and Redfearn, Christian L., Land Leverage: Decomposing Home Price Dynamics. Real Estate Economics, Vol. 35, No. 2, pp. 183-208, Summer 2007, Available at SSRN: https://ssrn.com/abstract=987688 or http://dx.doi.org/10.1111/j.1540-6229.2007.00187.x

Raphael W. Bostic (Contact Author)

Federal Reserve Bank of Atlanta

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Stanley D. Longhofer

Wichita State University - W. Frank Barton School of Business ( email )

1845 N. Fairmount
Wichita, KS 67260
United States
316-978-7120 (Phone)
316-978-3263 (Fax)

HOME PAGE: http://webs.wichita.edu/longhofer

Christian L. Redfearn

University of Southern California - Sol Price School of Public Policy ( email )

Los Angeles, CA 90089-0626
United States

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