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    Driving Forces of Real Estate Markets

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    minani marc
    This document discusses key concepts in real estate markets, including: 1) Real estate markets allocate scarce resources through the price mechanism as properties are voluntarily exchanged. Real estate submarkets group properties that are substitutes for potential buyers or tenants. 2) Rental rates and property prices are influenced by factors like long-term trends in the single-family owner-occupied market, minimizing occupancy costs for corporations, and rental and price trends for investors. 3) Significant influences include global factors like exchange rates, national factors like tax laws and interest rates, and local factors like employment and development trends.

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    Driving Forces of Real Estate Markets

    Uploaded by

    minani marc
    20 views17 pages
    This document discusses key concepts in real estate markets, including: 1) Real estate markets allocate scarce resources through the price mechanism as properties are voluntarily exchanged. Real estate submarkets group properties that are substitutes for potential buyers or tenants. 2) Rental rates and property prices are influenced by factors like long-term trends in the single-family owner-occupied market, minimizing occupancy costs for corporations, and rental and price trends for investors. 3) Significant influences include global factors like exchange rates, national factors like tax laws and interest rates, and local factors like employment and development trends.

    Original Description:

    Real estate marketing

    Original Title

    Lecture 1

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    This document discusses key concepts in real estate markets, including: 1) Real estate markets allocate scarce resources through the price mechanism as properties are voluntarily exchanged. Real estate submarkets group properties that are substitutes for potential buyers or tenants. 2) Rental rates and property prices are influenced by factors like long-term trends in the single-family owner-occupied market, minimizing occupancy costs for corporations, and rental and price trends for investors. 3) Significant influences include global factors like exchange rates, national factors like tax laws and interest rates, and local factors like employment and development trends.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    20 views17 pages

    Driving Forces of Real Estate Markets

    Uploaded by

    minani marc
    This document discusses key concepts in real estate markets, including: 1) Real estate markets allocate scarce resources through the price mechanism as properties are voluntarily exchanged. Real estate submarkets group properties that are substitutes for potential buyers or tenants. 2) Rental rates and property prices are influenced by factors like long-term trends in the single-family owner-occupied market, minimizing occupancy costs for corporations, and rental and price trends for investors. 3) Significant influences include global factors like exchange rates, national factors like tax laws and interest rates, and local factors like employment and development trends.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 17

    Lecture 1

    Driving Forces of
    Real Estate Markets
    “Markets”
    “Mechanism through which all goods and services are
    voluntarily exchanged among different owners”

    Through price, markets allocate scarce resources among


    competing uses.

    Real Estate Submarket: “Property within a certain price


    and quality range and within specified geographic
    areas that potential tenants or potential buyers would
    consider as alternatives when looking at a Subject
    Property”
    Rental Rates and Prices
     Single-Family, Owner-Occupied Market
    – General Price Trends
    – Long-term benefits
     Corporate World (long-term tenancy)
    – Minimizing long-term occupancy costs
    – Rent
     Investment World
    – Rental trends AND Price Trends
    Significant Influences
    on Rents and Prices
     Global Influences
    – Exchange Rates, Recessions, National Disaster

     National Influences
    – Tax Laws, Interest Rates

     Local Influences
    – Employment Trends, Social Patterns, Changes in
    Development
    Supply & Demand

    SUPPLY = SELLERS / LANDLORDS /


    AVAILABLE REAL ESTATE

    DEMAND = BUYERS / TENANTS


    Demand Curve

    Price/Rent
    As price decreases,
    quantity demanded
    increases

    Quantity of Space
    Short-Run Supply Curve

    Price/Rent
    Reflects inelasticity in
    a Short-Run market

    Quantity of Space
    Long-Run Supply Curve

    Price/Rent
    Reflects more
    elasticity in a Long-
    Run Market

    Quantity of Space
    Kinked Long-Run Supply Curve

    Price/Rent
    When price is above
    Pe, new supply will
    enter the market

    Pe

    Quantity of Space
    Characteristics of
    Real Estate Markets

     Durability
    – Inelastic short-run supply
     “Lumpy and Large” Economic Unit
    – Infrequent Purchase
    – Highly-levered industry
    – Large shifts in supply within localized markets
     Costly Information
    – Data not easily available
    – Costs of Market Studies and Appraisals
    – Search Costs
    Characteristics of
    Real Estate Markets
     High Transaction Costs
    – Title Insurance, Broker Fees, Lending Fees, Inspections/Due
    Diligence, Surveys, Endorsements, etc.

     Fixed Location
    – Allows Real Estate to be Substitutable

     Heterogeneity
    – Creates greater costs for market information and searching

     Government Regulated
    – Limits Real Estate Use
    – Can help or deter real estate use and value
    Lecture 1

    Short-Run Market
    Analysis
    Seasonality:
    Residential Home Sales
    Average
    Monthly Springtime housing sales
    Sales tend to run 40% higher
    than in December

    120%

    100%

    80%

    60%

    Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
    Lecture 1

    Intermediate and
    Long-Run Market
    Analysis
    Economic Base Analysis

    Export Sector: Employment bringing revenues into a region (i.e.:


    manufacturers of any product that serves more than the local
    population and brings revenues into the local region from
    outside)

    Multiplier Effect: New workers in an economy creating/causing


    even more jobs in different submarkets

    Service Sector: Employment geared toward serving the local


    population
    Factors Affecting Growth

     Regional Demographic Trends


    – Birth rates, death rates, size of households, income trends gender,
    education, social patterns, etc.

     Regional Supply Constraints


    – Physical: Lakes, topography, wetlands, etc.
    – Social: Politics, local planning/zoning boards, growth goals, etc.

     Regional Transportation Costs


    – Public Transit Systems (bus, rail, etc)
    – Linkage
    – Urban Sprawl
    The Internet and Real Estate

     Location-Free Workers
     Work Space and Living Space accomodating
    workers
     E-Commerce threat to the Retail Real Estate
    Submarket
     Warehousing

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