The distinction between land values and home values is important to maintain. There are thousands (millions?) of vacant home sites, the inventory of lots, that quickly lost value. For an interesting example, see the unfortunate saga of one little regional player, Lakeland Finance in Minnesota. They obtained their funding for exurban projects from some now familiar faces (Bank of Scotland) and lo and behold, they have no idea how to value what was supposed to be $500 million of far-flung residential bliss.

Minnesota's housing wastelands

Millions in loans with no appraisals? That was business as usual for one Minnesota lender that didn't have to worry about regulators. Now it's insolvent, and cities and homeowners are stuck cleaning up the mess.

The Star Tribune site has a link to the RBS receiver report for these "troubled legacy assets" and the story includes some apocalyptic photos of what's left behind.

Demographics are also a factor in the collapse of demand for distant suburbs. Young families with children are a declining share of the population and this shift will grow in coming decades. So, land for commercial and residential development in distant suburbs is a bad investment, regardless of gasoline prices.

In other words, the drop in gasoline prices won't restore the distant suburbs, even if the disastrous credit conditions could be taken out of the picture.