The cost of buying land and building on it threatens to put an end to constructing any new residential projects, according to recent reports.

In the 46 biggest metro housing markets, land’s share of property prices increased on average to 51% in 2004 from 32% in 1984, according to the study authored by Michael Palumbo, chief economist in the Fed’s flow of funds section, and Morris Davis, a former Fed economist now at the University of Wisconsin.

The report concludes that land’s increased share of property values “could mean faster home-price appreciation, on average, and possibly larger swings in home prices.”

Scott “have I got a home for you” Van Voorhis jumps in with another story about it, in today’s Boston Herald.

[All developers] face the same double crunch – a condo market headed south combined with out-of-control construction costs.

Arthur Winn, the Hub housing magnate behind the big Columbus Center plan, should know. The cost of building that giant condo and hotel air-rights complex, which would soar 400 feet over a Turnpike deck in the Back Bay, is now over $600 million.

That represents at least a $100 million run-up.

Now, don’t get all excited and think this is a good thing. Not necessarily. I don’t see this as leading to lower prices for housing, if that’s what you’re thinking.

The way I see it, if developers can’t afford to build anymore, one negative effect would be less supply. And, where you have less supply, but steady demand, you’ll have higher prices.

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Updated: January 2018

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