Cht 1: the real estate market Flashcards
(34 cards)
What is the definition of value as it applies to real estate?
The present worth of future benefits that would be gained from owning real property
What is the definition of price?
The amount of money or other asset that a buyer has agreed to pay and a seller has agreed to accept to complete the exchange of a good or service
The value of something is based on the answers to what four questions?
How much do I desire it?
How useful is it?
How scarce is it?
Am I able to pay for it?
What costs are incurred to produce a good or service?
capital, materials, and supplies
labor
management
overhead
Supply
the quantity of a product or service available for sale, lease, or trade at any given time.
Demand
the quantity of a product or service that is desired for purchase, lease, or trade at any given time
Define supply and demand.
Supply is the quantity of a product or service available for sale, lease, or trade at any given time.
Demand is the quantity of a product or service that is desired for purchase, lease, or trade at any given time.
What happens to a price if the supply increases relative to the demand?
The price decreases
What is meant by a state of market equilibrium?
Supply equals demand, and price, cost, and value are identical.
List three unique traits of real estate.
Demand must come to the supply
Illiquid
Slow to respond to changes
Inherent product value
Unique appeal of product
Decentralized, local market
In addition to demand, what factors influence supply?
development costs, particularly labor
availability of financing
investment returns
a community’s master plan
government police powers and regulation
How is the demand for office and industrial real estate calculated?
By identifying employment growth or shrinkage in a market, then multiplying the employment change times the average area of floor space a typical employee uses
What are residential users typically concerned with when looking for property?
quality of life
neighborhood quality
convenience and access to services and other facilities
dwelling amenities in relation to household size, lifestyle, and costs
What factors weigh heavily in local real estate market conditions?
cost of financing
availability of developable land
construction costs
capacity of the municipality’s infrastructure to handle growth
governmental regulation and police powers
changes in the economic base
in- and out-migrations of major employers
What is the main purpose of an economic system?
To produce and distribute a supply of goods and services to satisfy demand
Real estate demand is noted by:
the number of property buyers that wish to purchase at any given time.
What type of real estate user would be interested in the availability of a labor pool?
Industrial user
If price decreases:
demand is declining in relation to supply.
Since a producer has limited resources, it is imperative to maximize the efficiency of the production process and:
minimize its costs.
Real estate is classified as:
illiquid assets.
If demand increases relative to supply:
price increases.
What is it called when supply equals demand and price, cost, and value are identical?
Market Equilibrium
The third critical element of value is a product’s availability in relation to demand. This is known as:
scarcity.
Land has:
both inherent and utility value.
