Course 6 Market Survey and Analysis Flashcards
What is a market study and why are market studies conducted?
The purpose of the market study is to assure that there is enough sustainable demand for additional units without adversely impacting the existing supply, so as to maintain a balanced overall market.
Who uses a market study?
There are a number of users of a market study:
* Developers
* Builders
* Marketers
* Equity investors
* Lenders
* Federal agencies
* State and local agencies
What are the elements of a Market Study?
Regardless of the land use, every market study addresses the following:
* Site Analysis – strength of site due to use
* Economic and Demographic context – where demand will be created
* Supply context – competitive dwelling units – required by HUD
* Balance of supply and demand
* Product positioning in terms of offering and pricing given the supply and demand
What is the capture rate?
The capture rate is a percentage of qualified households in the PMA the property must capture to fill the units and achieve stabilized occupancy. The lower the rate the more eligible households and the better positioned the property.
Total number of units / total number of households that meet the applicable age and any income band requirements.
What is the penetration rate?
The penetration rate is the percentage of qualified households in the PMA that the property and similar existing and proposed competing properties must capture to fill all units and achieve stabilized occupancy.
What is at place employment?
At place employment is based on the Quarterly Census of Employment and Wages (QCEW). Data is taken from the employer reporting of employees covered under the unemployment insurance program. Only filled jobs are counted, whether full or part-time, temporary or permanent, by place of work.
What types of employment are excluded from at place employment?
Major exclusions from unemployment insurance coverage include self-employed workers, most agricultural workers on small farms, all members of the armed forces, elected officials in most states, most employees of railroads, some domestic workers, most student workers at school and employees of certain small non-profit organizations.
What is a location quotient?
Jobs are broken down by industry sector. A location quotient compares the ratio of local employment in a sector with the ratio of national employment in the same sector.
% of local employment / % of national employment = LQ
How do the roles of the market analyst and appraiser differ?
The market analyst evaluates market trends such as supply and demand for the rental housing market and determining absorption.
The appraiser is responsible for determining the financial aspect of the property including the income (rent) and (operating) expenses.
What is net demand analysis?
Net demand looks at the total renter households added to the market. The analysis is trying to determine if there is enough net new households to address the increase in housing stock.
What factors are considered in a net demand analysis?
The factors include household growth, existing rental market, units removed from the market, percentage of renters, and replacement units. These are then compared to the pipeline to determine if balance exists.
What time frame is considered when completing a net demand analysis?
Per the HUD Map Guide, the net demand must be based on the calculation of incremental demand typically for a 36 month period.
Net demand takes into consideration household growth for three years and the housing units removed from the housing stock for demolition, upgrades, conversions, or abandoned dilapidated units.
What is the Component of Inventory Change within a net demand analysis?
To determine the number of units removed from the market a report, created for HUD called the Component of Inventory Change using data taken from census data, is used. It is common for analysts to use a factor of .27. Certain markets such as inner city markets may dictate a higher rate such as .54. This factor is applied to the projected housing stock to obtain the total overall demand.
How is the status of existing rental stock determined within a net demand analysis?
Both stabilized and units in lease up are taken into consideration. Ideally a 5% vacancy in the market is used. The vacancy rate is calculated by taking the total number of units in the market divided by the total number of vacant units. These additional units are then added to the new rental housing demand to obtain the total unit demand for the next three years.
How is excess demand determined within a net demand analysis?
Once the total unit demand is calculated, the analyst must consider the supply. Projects that are existing, new, as well as the subject are considered. If the 5% vacancy rate is used, then 95% occupancy is applied to calculate the total new supply. The difference between the total unit demand and the total new supply determines the excess demand.
