chapter 2

Question 1

How does the economic business cycle effect the real estate cycle

Answer 1

the real estate cycle lags the business and it has steeper and higher points

Question 2

What is the formula for new rental rate

Answer 2

old rental rate/old CPI * new CPI

Question 3

What does the new rental rate tell you

Answer 3

how much you should raise rents due to inflation

Question 4

What is the discount rate

Answer 4

the rate commercial banks pay to borrow from the FED

Question 5

What is the federal funds rate

Answer 5

the rate institutions (mortgage and commercial) pay to borrow from eachother on short term loans

Question 6

Who sets the federal funds rate

Answer 6

the FED

Question 7

How does the FED set the federal funds rate

Answer 7

they buy and sell gov bonds

Question 8

What is the prime rate

Answer 8

the rate commercial banks charge for short term loans to business customers with very high credit ratings

Question 9

What is the treasury bill rate

Answer 9

the rate the gov pays investors on 90 day loans to finance their debt

Question 10

Why do investor pay attention to the T bill rate

Answer 10

changes in it cause changes in the commercial mortgage rates

Question 11

In a stabilized market, when interest rates are low or moderate, real estate value is

Answer 11

greater relative to income

Question 12

What are the macroeconomic trends that effect real estate performance

Answer 12

Unemployment & foreclosures 
Environment 
Technology 
Gov policy and currency 
Foreign investment

Question 13

How does unemployment effect real estate

Answer 13

high umemployment causes less comsumer spending

low unemployment causes more consumer spending

Question 14

How does foreclosures effect real estate

Answer 14

more foreclosures of single fam homes changes the demand of renting, and the supply because a lot of those houses become rentals

Question 15

How does environment effect real estate

Answer 15

poor air quality, water quality and waste disposal

Question 16

How has technology effected real estate

Answer 16

virtual shopping has hit retailers

Question 17

How does the fed effect the real estate market

Answer 17

increasing or decreasing the money supply
Changing the diiscount rate
changing member bank reserves

Question 18

How does changing money suppply work

Answer 18

as the fed buys gov securities from banks, the money suppply increases because the banks now have more money from selling the securities
as the fed sells gov securities to banks, the money supply decreases because the banks used their money to buy the securities instead of lending to you