Tuesday, August 02, 2005

HBAS #2: 'They are Not Making Anymore Land"

One often heard housing bull argument (HBA) is that 'they are not making anymore land' and thus housing unit prices will go up because supply is constrained. While it is basically true that they are not making anymore land, land is not the same as a housing unit. Consider these points:

  • They may not be creating anymore horizontal land, but 'vertical land' is being created at a furious pace. Condos are vertical land.
  • In many of the bubble cities there is plenty of land to sprawl onto (think Sacramento, Phoenix, Boston etc.)
  • Land is being made available through various sources such as the BLM ( Bureau of Land Management) and base closings.
  • Certainly, they were not making anymore land during the early 1990's housing crash.

The Housing Bull Arguments Series will continue. If you have any suggested topics for upcoming posts in the HBAS please post in the comments.


  1. This is one of my favorite arguments because it's probably the dumbest.

    No, they're not making more land, but consider this - in my urban area, they are constantly tearing down smaller, older buildings and building huge condo units. They're creating vertical land not just in empty spaces where nothing was before, but in places that were already being used for real estate. The use of vertical land is therefore even more rampant than one would think. This can go on almost forever - tearing down, rebuilding, etc.

  2. This argument is older than the hills (and they are not making any more hills, either). But we still have ENORMOUS amounts of undeveloped land, and we are now more able to use it then ever before because:

    1) as we move toward service-based jobs and away from manufacturing, there is less need for people to be concentrated in specific regions, and

    2) it is easier then ever to integrate geographically distributed people due to recent advances in communication technology.

    Robert Shiller has a great citing in his book from an 1800's newspaper story in LA in which land costs were allegedly justified because they were "out of land"... in the 1800's!

  3. Yes... very dumb... The fact is in Silicon Valley ... they are not making new jobs. Much of the increase in headcount comes from Sox 404 compliance work and job segregation. CEO/CFO are unhappy with the added costs and would rather see the headcound go down.