Prices for land remain volatile in the wake of the financial crisis and therefore is considered a “very risky” investment despite its history of wealth building, according to a study from the Ziman Center for Real Estate at the University of California, Los Angeles, MBA Newslink reported Oct. 19.

The study, “The Great Land Price Swing: Lenders and Investors Beware — Land is a Very Risky Asset,” cautioned lenders in metropolitan areas to be wary about lending against land value. The study’s author, Stephen Oliner, wrote that “metro areas in which land represents a large share of property value — which includes many areas in California — are especially susceptible to booms and busts in real estate markets,” MBA Newslink reported.

At the height of the real estate boom in 2006, land in the U.S. (excluding farmland and government property) was estimated to hold a value of more than $17 trillion. That amount was nearly 40 percent of the value of all U.S. real estate. However, by mid-2011, land prices fell by more than 50 percent from their peak.

Oliner studied data provided by CoStar Group, Inc., which covered 180,000 commercial and residential land sales in 23 metropolitan areas from the 1990s through the middle of 2011. He reported that swings in value were especially marked in the residential sector and tended to be the most dramatic on the East Coast and the far West, particularly California, MBA Newslink reported.

In fact, land values increased faster than house prices during the real estate boom, rising about three times as high, according to the study.

What led Oliner to recommend that lenders remain cautious is the fact that land value has proven to be more volatile than housing prices because land supply is “much less elastic” than housing supply and its use is limited by both geography and regulation.

Read the UCLA study.