When it comes to estimating the value of the US economy, the math is relatively simple (at least according to economists) - it is the sum of the value added outputs of every class of enterprise, which is better known as the Gross Domestic Product. Likewise, when it comes to calculating the value of assets, whether financial, such as stocks, or real, such as one's house, the best representation is through the markets, i.e., a clearing mechanism that reveals what someone is willing to pay for such an asset.
But what about the value of just the land one's house sits on? Or all the land of the state, or the entire United States?
That is the answer that Dept of Commerce economist William Larson set off to find out. His answer [4]: a whopping $23 trillion (as of 2009), more than $5 billion greater than the entire US GDP. That is the BEA's estimate for the 1.89 billion acres of land that make up the 48 contiguous states of the US and the District of Columbia. The number is a land estimate only and excludes any improvements such as buildings, infrastructure and bodies of water. It is also down about 24% from the prior peak-bubble high just over $26 trillion hit in 2006.
How did he make his assessment? According to the WSJ [5], Larson's calculation used satellite images to determine each type of land, including farms, forests and developments.
For undeveloped land he used comparable farm-land values to estimate prices. For developed land, he relied on estimates of land quality, home values and property attributes within a given Census tract. Larson believes his values are correct within a 10% margin of error.
Developed land is typically sold in a bundle with buildings or structural improvements, and it can be difficult to disentangle the two.
Undeveloped land in rural areas can be even trickier to price because it’s not often bought and sold . For some federal land acquired in the Louisiana Purchase, the last transaction was in 1803, when the seller was a fellow named Napoleon.
“Land has long been recognized as a primary input in production and as a store of wealth,” wrote Mr. Larson, an economist at the Federal Housing Finance Agency. “Despite its fundamental role in nearly all economic activity, there is no current and complete estimate of the value of the land area of the United States.”
Furthermore, the analysis doesn’t account for the changes in value due to the shale-gas activity in the Midwest and elsewhere.
Here are the more notable findings from his paper [4], via the WSJ:
- The federal government owns 24% of all land, worth a collective $1.8 trillion. (That’s 8% of the country’s total value, or around 10% of the total outstanding federal debt.)
- Just 5.8% of U.S. land is developed, but that land accounts for 50.7% of the total value.
- Almost half, 47%, of U.S. land is used for agriculture.
- Besides New Jersey, three other states have land worth an average of at least $100,000 an acre: Rhode Island, Connecticut and Massachusetts. At least a quarter of the land in those four states is developed.
- Land in 24 states, including Wisconsin, Texas and Maine, is worth less than $10,000 an acre, on average.
- In Nebraska, 92.7% of land is used for agriculture, the most of any state.
- Nevada has the largest share of federal land, covering 86.8% of the state. Connecticut has the least, just 0.1% of the state’s area.
As for the key answer, namely "what is the dollar value of my state", there are two answers. One is the total absolute value for the state, shown on the table below, and which has California, Texas and New York in the top three places...
[6]
... or the average value per acre in any given state. Clearly there is a substantial difference.
[7]
As laid out on a map:
[8]
One caveat: while D.C. is clearly the smallest evaluated territory, at just 40 acres, it has the highest value per acre of any US state: some $1.05 million. So take the above findings with a grain of salt.
Source [4]
