Level 22 Level 24
Level 23

Real Estate Market

153 words 0 ignored

Ready to learn       Ready to review

Ignore words

Check the boxes below to ignore/unignore words, then click save at the bottom. Ignored words will never appear in any learning session.

All None

Buyers Market
The supply of available properties exceeds the demand.
One individual, or group of individuals, living in one dwelling unit.
Seller's Market
The demand is greater than the supply of homes available.
when the supply increases and demand remains stable...
the prices go down
when the demand increases and supply remains stable...
prices go up
Factors of labor force construction and material costs
shortage of labor or building materials or increase in the
Factors of Governmental controls and financial policies
government monetary policy of borrowing money has a direct
factors of population
the demand for housing grows with population.
niche marketing
phrase used to refer to the targeted marketing of a specific demographic population.
The three questions every economy in every land has to deal with.
What will be produced? Who will do the
Immobility of Real Estate
The geographic location of real estate is fixed. The land and the improvements on
The market is slow to respond to change in supply and demand.
Design, land, acquisition, site preparation, and
Land is indestructible
Land is permanent. The physical structures (improvements) on the land are durable. However,
Real Estate is unique
No two tracts of land are identical. There is no standard product. Even two lots side by
Government controls and influence the market through zoning, building codes, taxes and so forth.
Characteristics of the Real Estate market
Local (Immobile), Slow Response (supply of, demand for), Permanent
Supply and demand factors
A study of markets and their operations reveal several factors that influence supply
Variables that influence supply
Availability of skilled labor, availability of construction loans and financing.
Availability of skilled labor
Numerous skilled laborers such as carpenters, roofers, and electricians, are
Availability of construction loans and financing
New construction is directly related to the availability of
Availability of Land
Although land seems physically plentiful, the supply of the type and location of land most
Availability of Materials
The availability of construction materials influence the supply of new housing.
Variables that influence demand
Price of real estate, population numbers and household composition, income of
Price of real estate
There is inverse relationship between price and the demand for real estate. When prices
Population numbers and household composition
The demand for dwelling space depends on both numbers of the
Income of consumers
Where as change in price is inversely related to change in demand, income is directly
Availability of mortgage credit
The availability and cost of mortgage credit has been called barometer of the real
Tight money market
Develops when interest rates rise, a corresponding drop is reflected in housing demand
Consumer taste or preference
Different architectural designs are sometimes introduced brief periods of
Market Indicators
Price levels, vacancy rates, sales volume.
The value of real estate is heavily influenced by
changes in the surrounding area. The principal of change is
Obsolescence is
the state of being which occurs when an object, service, or
Real estate is influenced by economic obsolescence, which is generally
Real estate is influenced by
economic obsolescence which is generally incurable
The principal of highest and best use is fundamentally determined by
alternative types of potential users bidding
for a site in accordance with
the locational and environmental value of the site in each use
Real estate is slow to respond to change in supply and demand
Nonhomogeneous means
all properties are unique, from the legal description to the bundle of rights. They may have
One principle of physical characteristics of real estate is
real estate is indestructible and in a fixed
Improvements to land include all man made things such as
houses, barns, wells, driveways, sidewalks, etc.
The government controls influence of the real estate market through
zoning, building codes, taxes, building
One way that the government controls influence of the real estate market is through
One way that the government controls influence of the real estate market is through a
Master Plan
Government interference in real property is referred to as P E T E
Police Power. Escheat. Taxation. Eminent
Demand is
the desire to purchase the amount and type of real estate that is for sale or for rent within a
Demand is influenced by the
population of household composition. the number of people in area and the
Supply is
the amount of real estate offered for sale or rent in a given price range
Supply is influenced by
availability of skilled labor. When construction is on going in an area, the demand for
To be able to have knowledge of market conditions is
essential to the real estate professional
A key indicator of market conditions is
price levels. The Board of Realtors keeps careful records of property that
A key indicator of market conditions is that the
sales volume is also available to the real estate
A key indicator of market conditions is that
area preference is also indicated by the statistics in the volume of
The three major indicators in the real estate market are
vacancy rates, price and sales information, and
One of the three major indicators in the real estate market is
vacancy rates. Too high a vacancy means too little
Real estate is an economic product that is subject to
economic laws and influences, much like all of the other
Understanding the fundamentals of real estate economics enables one to
recognize the effect of current economic
The goal of an economic system is to
produce and distribute a supply of goods and services to satisfy the demand
Economic activity centers on the
production, distribution and sale of goods and services to meet consumer
The interplay of supply and demand is what makes an economy work.Consumers demand
goods and services;
In addition to supply and demand, the other critical component of an economic system is the
price mechanism, or
A price is
the amount of money or other asset that a buyer has agreed to pay and a seller has agreed to accept
Price means the final trading price. It is Not
the preliminary asking price of the seller nor the initial bidding
Asking and bidding prices are
pricing positions in a negotiation between the parties prior to the exchange
The true price of an item or service is
the final number the parties agree to
Price is Not something of value in itself. It is only a number that
quantifies value
The economic issue underlying the interplay of supply and demand is
how do trading parties arrive at the value
Consider consumer demand for air conditioners
Why do air conditioners have value? How do they command the price
The value of something is based on the answers to four questions
How much do I desire it?, How useful is it?,
With regard to Desire in the real estate market, One determinant of value is
how dear the item is to the
With regard to Desire in the real estate market, using an air conditioner for an example, the question becomes
Utility is a determinant of value. It is
the product's ability to do the job
With regard to Utility, using an air conditioner for an example,
can the air conditioner satisfy my need to
With regard to Scarcity, using an air conditioner for an example,
the air conditioner is quite valuable if
With regard to Purchasing power, using an air conditioner for an example,
a component of value is the
innumerable factors. Since price is a reflection of
the total of all value factors at any time, changes in the
To produce a good or service, a supplier incurs costs, or those expenses necessary to
generate and deliver the
The essential production costs are the costs of
capital, materials, and supplies, labor; management, and overhead
Costs play an important role in the dynamics of
supply, demand, and value
With regard to Cost and price,
consider a producer who is efficient and produces the product or service in demand
Supply, demand, and price
interact continuously in a market
A market is
a place where supply and demand encounter one another. Suppliers sell or trade their goods and
if supply increases relative to demand
price decreases
if supply decreases relative to demand
price increases
If a valued product becomes increasingly scarce, its value and price go
up as consumers compete for the limited
If there is an overabundance of a product, the price
falls, as demand is largely met
If demand for a product or service increases in relation to supply, prices will go
up as consumers compete for
If demand diminishes, the price
drops with it
By tracking a price trend, one can
draw conclusions about supply and demand trends
if price decreases, demand is
declining in relation to supply
if price increases
demand is increasing in relation to supply
To assess price movements, the supply and demand of a product or service must
always be considered together
Demand and supply to rise and fall together at the same rate Example
If demand for bicycles jumps a million
Another significant principle of supply, demand and price interaction is
market equilibrium
market equilibrium is when
a market tends toward a state of equilibrium in which supply equals demand, and
market demand moves to meet
supply moves to meet
If inventories of an item are very high, suppliers will
stop production until the oversupply has been depleted
If the price of an item far exceeds its cost, new suppliers will enter the market with
lower prices
If the price of an item is far less than its perceived value, consumers will either
bid up the price or the
Real Estate Demand Example
a new convenience store opens on the edge of a rapidly growing town. The owners know
As an economic commodity, real estate is bought, sold, traded, and leased as a
product within a real estate market
Real estate, like other products and services, is
subject to the laws of supply and demand
Real estate is a relatively illiquid economic product, meaning
it cannot always be readily sold for cash
Since Real estate is a large, long-term investment that has no exact duplicate, buyers must
go through a complex
Real estate is relatively slow to respond to
market imbalances
Because new construction is a large-scale, time-consuming process, the market is slow to respond to
increases in
and sold elsewhere. Instead, owners must
wait out slow periods and simply hope for the best
In real estate, supply is
the amount of property available for sale or lease at any given time
Supply is generally Not the number of properties available, except in the case of
residential real estate
These supply units, by property type, are
residential (dwelling units), commercial and industrial, (square
responds to is
government police powers and regulation
Real estate demand is
the amount of property buyers and tenants wish to acquire by purchase, lease or trade at any
Units of demand, by property classification, are
residential (households), commercial and industrial (square
The unit of residential demand is the household, which is an
individual or family who would occupy a dwelling
Residential demand can be broken down into demand to
lease versus buy
Residential demand can be broken down into demand for single family homes versus
Residential demand can be very difficult to
One measure of residential demand is
the number of buyers employing agents to locate property
into demand for leased space versus
purchased space
In most instances, the area demanded refers to the improved area rather than
the total lot area
Demand for office and industrial real estate is calculated by
identifying employment growth or shrinkage in a
Demand for office and industrial real estate Example
consider an office property market where employment in the
around the components of
value such as desire, utility, scarcity, and purchasing power
Residential users of real estate are concerned with
quality of life
Retail users of real estate are concerned with
sufficient trade area population and income
Office users of real estate are concerned with
costs of occupancy to the business
Industrial users of real estate are concerned with
The engine that drives demand for real estate of all types in a market is
employment, base employment and
Base employment is
the number of persons employed in the businesses that represent the economic foundation of
Base employment example
the auto industry has traditionally been the primary base employer of the Detroit
Base industries lead to the rise of
supporting and secondary industries in the market
manufacturing plants. In addition, service businesses emerge to support the many needs of the
local population
Base employment feeds
total employment
Total employment in a market includes
base, secondary, and support industries
Total employment creates a demand for
a labor force
employment grows, so grows the population, leading to the demand for
housing and for retail support
to creating demand for real estate, employment creates the
purchasing power necessary for households to acquire
Without employment, a real estate market evaporates, as there is no demand for
commercial or industrial facilities,
No Demand Example
The best example of this phenomenon is a gold rush boom town. As soon as the gold runs out,
price movements
In real estate, prices, construction, and vacancy
move up and down in the cycle
Construction represents
the addition of new supply
Vacancy is
the amount of total real estate inventory of a certain type that is unoccupied at a given time
Absorption is
the amount of available property that becomes occupied over a period of time
When vacancies are low, this situation stimulates suppliers to
construct additional housing or commercial space
New construction, by adding supply, causes vacancy to rise and prices to fall until
supply demand equilibrium
equilibrium point until
price and vacancy conditions are sufficiently attractive to encourage renewed construction.
The real estate market is
local by definition
local factors weigh heavily in local real estate market conditions. One is the
cost of financing
Regional and national economic forces influence the local real estate market in the form of
changes in money
these instances, currency fluctuations have
significant impact on the local economy
Example of government influence over the local real estate market
a city government's power to declare a