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“Buy land,” Mark Twain famously said. “They don’t make it anymore.” Lawrence S. Pratt, a senior fellow at the American Institute for Economic Research says many commentators on the real estate bubble are missing that essential fact. A larger and larger percentage of increased home prices is coming from the land underneath them. In 1952, Pratt notes, land accounted for about 15% of a property’s total value. Today it’s more like 40% and that’s up from 30% in 1996. The explanation is that there is a finite amount of land available, particularly within commuting distance. In addition, zoning codes and environmental regulations restrict the availability of land, increasing the price of what’s buildable. Pratt’s research doesn’t justify a doubling of homes prices in many parts of the country over the past five years. But it does give long term investors something else to feel good about.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.