Bart,

In Dr. Michael Hudson's speech to the New York Real Estate Institute in 2001, he made the reference

As I believe you are a student of the Fed Flow of Funds report, I was wondering if:

a) You were aware of the change in the separation of building vs. land residual values tracked in said report (ceased as of 1994 for economy wide, 1997 period)

b) More importantly, if you by any chance still tracked this or knew of other sources

http://michael-hudson.com/2010/08/th...e-valuation-2/

...

The Fed’s quandary with regard to its 1993 and 1994 U.S. land value estimates

Statistics on overall U.S. real estate values are published by the Federal Reserve Board in its Flow-of-Funds statistics, Table Z.1 (Balance Sheet of the U.S. Economy). For many years these estimates were broken down between land and buildings for a number of categories. These categories included residential, non-profit, government, corporate and non-corporate nonfinancial real estate.

Since 1997, however, the conceptual problems underlying the allocation of value as between land and buildings have led the Fed to stop publishing comprehensive real estate statistics. 1994 is the last year for which it has estimated economy-wide land values.

The problem was that the Fed discovered that its methodology produced nonsensical results – a negative value of $4 billion for all land owned by nonfinancial corporations for the year 1993. This number resulted from imputing land values by subtracting the estimated replacement cost of buildings from overall property market prices. This “land residual” method left little room for land value, for replacement values continue their rise even when overall market prices decline, as periodically occurs. In such downturns the replacement value absorbs nearly all the market value of corporately owned real estate.

In operational terms, government statisticians multiply the original cost of buildings (or, in cases where buildings are sold, their assessed share of the property at the new transaction’s price) by the annual rise in the Commerce Department’s construction price index. The fact that this price index tends to rise steadily seems to explain the rise in property values by wage inflation and the rising materials costs. On this logic real estate prices seem merely to keep up with inflation.

There is no hint of unearned gains or a free lunch.

In view of real estate’s dominant economic role, it is ironic that no attempt has been made to create better statistics. The Fed’s methodology undervalues the land by as much as $4 1/2 trillion. As matters stood in 1994, for instance, the Fed estimated the U.S. economy to hold some $20 trillion in real assets (excluding human capital, for which no official statistics are published). The land’s value was calculated to be $4.4 trillion, and building values $9 trillion.

However, an estimate based on historical values resulted in a shift of land and buildings suggests that land rather than buildings represents two thirds of the nation’s overall real estate value.

A partial selection of real estate statistics continues to be published. The Fed estimated that at the end of 1996, for instance, households and non-profit institutions held $11.4 trillion in tangible assets. Nearly 80 percent ($8.2 trillion) of gross household wealth took the form of real estate (whose $3.6 trillion in mortgage debt represented nearly two-thirds of the household sector’s liabilities). Non-profits held $0.8 trillion. Real estate also accounted for nearly half ($3.4 trillion) of the $6.9 trillion in tangible assets owned by non-financial corporate business.

...