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Understanding our Political Economy

Understand the dynamics of urban land markets, the value of residential properties in the U.S., and the impact on the economy. Explore the cycle of real estate booms and busts and how it affects financial markets and taxpayers.

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Understanding our Political Economy

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  1. Understanding our Political Economy LESSON THIRTEEN Lessons of Urban Land Markets

  2. “The insatiable demand to acquire any parcel in Manhattan for development has been supported by worldwide attention from many different first-time purchasers from abroad. …”

  3. There are 315 million people in the U.S. • There are 105.5 million households • 65% of all households (68.575 million) live in homes they own, or will own once they pay off one or more mortgage loans

  4. $181,500 (median price of a residential property • 35% as a conservative land-to-total-value ratio • $64,725 is the median land value per residential property • $64,725 multiplied by the total households in the United States ($105.5 million) = $6.8 trillion • This does not include land that is vacant but could be developed for residential housing

  5. $6.8 TRILLION Of Residential Land Value

  6. “The Obama administration’s $500 billion or more proposal to deal with America’s ailing banks has been described by some in the financial markets as a win-win-win proposal. Actually, it is a win-win-lose proposal: the banks win, investors win — and taxpayers lose.”

  7. Steve Hanke, Johns Hopkins University

  8. “These data talk, and the most interesting thing they say is that every 18 years we can expect the culmination of a credit-fueled real estate and ensuing business cycle. This, of course, doesn't imply that all recessions are preceded by a real estate cycle. It only says that all real estate cycles have spawned economic downturns. …”

  9. “This knowledge has allowed for some prescient forecasts. The prize in that department goes to Prof. Fred Foldvary who wrote in 1997: ‘the next major bust, 18 years after the 1990 downturn, will be around 2008, if there is no major interruption such as a global war’." Steve Hanke. “The Great 18-Year Real Estate Cycle,” Globe Asia. February, 2010

  10. END OF LESSON THIRTEEN

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