Chapter 2 The Real Estate Cycle and the Secondary Market

Question 1

4 Phases to the business cycle

Answer 1

• Peak (top or oversupply)
• Recession (contraction or slump)
• Bottom (through)
• Recovery (Expansion or boom)

Question 2

In a seller’s market:

Answer 2

Demand for a product exceeds the supply. The price of the product tends to increase

Question 3

A buyer’s market is when:

Answer 3

When prices begin to fall and production diminishes

Question 4

Define Balance

Answer 4

The economic principle that value is created and maintained when opposing economic

Question 5

Define Demographics

Answer 5

The study and description of the population of an area or neighborhood. Includes age, education, gross income, disposable income, number of family members, saving and spending patterns.

Question 6

Define Gentrification

Answer 6

The fixing up of rundown neighborhoods by renovating and rehabilitating houses

Question 7

Define Disintermediation

Answer 7

A loss of savings deposits to higher yielding competitive investments

Question 8

Predatory loan practices include:

Answer 8

• fraud
• usury
• deception

Question 9

What is Deficit Spending?

Answer 9

When the government is forced to borrow money, making less money available for construction and home loans.

Question 10

The “degree of risk” in a real estate loan:

Answer 10

• can be controlled by qualifying a buyer and a property before a loan is made
• refers to the likelihood of default by the borrower
• refers to the ability of the lender to recover loan proceeds through foreclosure

Question 11

In 1970, The Emergency Home Finance Act:

Answer 11

Furthered the role of the Federal National Mortgage Association (FNMA -Fannie Mae)

Question 12

A real estate cycle refers to the real estate market’s reaction to the forces of:

Answer 12

Supply and demand