A number of blogs and newspapers around the country are reporting on a new study by the Federal Reserve, “released last Thursday”, that says that land prices around the country have been surging, contributing to the increase in real estate prices nationwide. I invite you to read an article about this on RealEstateJournal.com:
I found this to be of particular interest, since I do a fair amount of work with raw land. The article mentions that the share of the land’s value in property prices has risen recently to 51% of a propety’s value in 2004, up from 32% in 1984. Those percentages may be true for the nation as a whole, but they aren’t for Santa Cruz. An urban lot in the city of Santa Cruz, for example, is likely to be worth $500,000; a modest, newly built 3/2 home on that land would fetch $800,000 in most neighborhoods, meaning that the land accounts for 62% of the value.
If the nation as a whole is experiencing higher land costs, though, you know that Santa Cruz is going to be leading the pack! With such little useable land (so much mountain land is unbuildable, the farmland is protected by zoning, and parkland comprising 50% of the total land area), Santa Cruz county will naturally “enjoy” higher land prices than many areas with similar demographic numbers, contributing to our high real estate values.