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Unit 1 Intro. To Real Estate Business > Real Estate Supply and Demand > Flashcards

Real Estate Supply and Demand Flashcards

1
Q

What is the function of a Market?

A

The Function of a Market is to provide supply and demand to establish market value.

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2
Q

A Market exist only when what?

A

When Goods can be bought and sold

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3
Q

Suburban areas are areas that are mainly residential area with a larger population than rural areas.. T/F?

A

True.

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4
Q

Suburban is defined as what?

A

Suburban areas are areas that are mainly residential area with a larger population than rural areas.

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5
Q

Demand is defined as what?

A

The quantity of goods and services that consumers are “Willing and Able” to buy at a given price.

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6
Q

Demand is dependent on Consumers who are what?

A

Willing and Able to buy. Consumers have not only be Willing to buy a property, but also Able. Meaning they need to have the means to buy the property.

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7
Q

Real Estate Market is made up of what?

A

Residential and commercial lands and structures.

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8
Q

Residential and Commercial land and structures make up what?

A

The Real Estate Market. Without these lands and housing, the RE Market will fall.

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9
Q

What Condition can affect the number of homebuyers and businesses looking for property to buy in a given area?

A

Economic Conditions can greatly affect the possibility of consumers buying property in a given area.

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10
Q

What happens when both Supply and Demand in a market are well balanced?

A

There is neither Inflation or Deflation of real property.

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11
Q

What does it mean when Supply is greater than Demand?

A

It means that there is a greater Supply of properties to be sold than there are buyers who are willing and able to pay.

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12
Q

What happens when Supply is greater than Demand?

A

Deflation occurs, which means that prices will decrease because the Supply of properties to be sold are greater than the quantity of buyers. So property prices Decrease to balance out Supply and Demand to attract more consumers

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13
Q

What does it mean when Demand is greater than Supply?

A

It means that there are more buyers willing and able to purchase property than there are properties to be sold. Meaning that the Quantity of properties to be sold is lesser than the number of Buyers looking to buy property. Which causes Prices to Increase to balance Supply and Demand

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14
Q

What happens when Demand is greater than Supply?

A

Inflation occurs. This means that the quantity of consumers willing and able to buy property is greater than the quantity of properties to be sold. To counteract this and balance supply and demand, Prices Increase because consumers are competing for the property.

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15
Q

What is Inflation?

A

An increase of prices.

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16
Q

What is Deflation?

A

A Decrease in Prices.

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17
Q

What does it mean when consumers compete for property?

A

It means that the quantity of Demand is Greater than the Quantity of properties to be sold.

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18
Q

What does it mean when producers need to attract more buyers?

A

It means that the Quantity of Supply is Greater than the quantity of consumers willing and able to buy.

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19
Q

What are the 2 Characteristics that affect the Market

A

Uniqueness and Immobility.

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20
Q

Because of “What” is the reason Real Estate Markets are Local Markets?

A

Uniqueness and Immobility.

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21
Q

What is Uniqueness?

A

Uniqueness refers to the way no two parcels are identical and why each has its own geographical location.

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22
Q

What is Immobility?

A

Immobility refers to the fact that homes cannot be relocated to satisfy high Demands where Supply is low. Hotels cannot force homeowners to relocate because Dollywood causes an increase in tourist visits in the area. Nor can buyers relocate to areas where there is greater supply.

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23
Q

The Market generally adjust fast to the pressures of Supply and Demand. T/F?

A

False. The Market will adjust slowly to the pressures of supply and demand because of conditions of development and construction. Development and construction are slow processes. When a natural disaster causes damage to surrounding commercial and residential areas, the Market will slowly adjust as the areas affected are slowly reestablished.

24
Q

What does the Government’s Monetary Policy have to do with real estate?

A

Monetary Policy is governed by the Federal Reserve Board to directly control the Central Bank’s activities and communications on money supply to the U.S. So, when FHA discounts their interest rates to Lenders, this directly affects the interest rates FHA-approved banks will charge borrowers.

25
Q

The FHA and Ginnie Mae can directly affect the amount of money available to lenders for mortgage loans. T/F

A

True. The FHA and Ginnie Mae make it possible for Lenders to create affordable loans for borrowers who are low income, underserved, or first home buyers.

26
Q

How does the FHA or Federal Housing Administration help home buyers?

A

The FHA provides insurance/securities and discounted rates on mortgage loans created by FHA-approved banks. This allows more borrowers to be qualified for mortgages.

27
Q

How does Ginnie Mae help home buyers?

A

Ginnie Mae or the Government National Mortgage Association was created to increase home buying. This is done by guaranteeing that the Federal Government will pay both principle and interest costs to the investors even if the mortgage holder is unable to pay the lender on time or even at all. This in turn allows lenders to create affordable loans for borrowers with no risks.

28
Q

What is a Principle?

A

A Principle is the amount that the borrower agrees to pay back.

29
Q

What is Interest?

A

Interest is the cost of the borrowed principle.

30
Q

Governmental policies on real estate taxation rates always creates negative affects. T/F

A

False. Government policies on real estate taxation can have both “Positive and Negative affects.”

31
Q

How can Government policies on real estate taxation have both positive and negative affects?

A

While High Taxation rates may deter Investors, this can entice new businesses and industries to the area for tax incentives, which then brings in new employment and expands the residential real estate market.

32
Q

How can Local Governments affect the Real Estate Market?

A

Land codes and zoning ordinances help shape the character of a community and control land use. Careful planning of local governments can help stabilize, and even increase real estate values.

33
Q

How can homebuying have financial incentives? (3)

A
  1. If property’s value increases, the owner can get more money than the original purchase price.

Ex. Sale Price 200,000 - Original Price 170,000 = 30,000

  1. When monthly mortgage payments include the principle owed, the owner’s ownership interest increases.
  2. Tax deductions
34
Q

Define Demographics?

A

The study and description of a population.

35
Q

What factors affect Real Estate Demand? (4)

A
  1. Population
  2. Demographics
  3. Employment
  4. Wage levels
36
Q

What are factors of a population that can affect the quantity and type of housing in a community?

A
  1. # of Occupants per house and Ages
  2. Adult to children ratio
  3. Family Income
  4. Lifestyle
  5. # of Retirees
37
Q

Adult to Children ratio and # of retirees can affect what of a community?

A

The type of housing and number of houses.

38
Q

What is Equity?

A

Equity is the difference between the market value of the property and the amount stilled owed. This means that the more you pay off your mortgage loan, the more equity you have on your home.

Ex. Market Value 500,000 - Still Owe 150,000 =350,000 in Equity/amount you earn at time of sale

39
Q

What can I do with Equity?

A

Equity can be used towards anything OR towards the purchase of a new home.

40
Q

Is the Interest paid towards a Mortgage, tax deductible?

A

Yes. Homeowners can deduct from their gross income the mortgage interest paid up to a certain point. By deducting from the gross income, this configures your taxable income, which can lower the amount of income tax you will pay.

41
Q

What is significant about the date, December 14, 2018?

A

Any Mortgage loans that were taken out Before December 14, 2018 are NOT tax deductible. Any Mortgages taken out AFTER this date can deduct Interest paid up to 750,000

42
Q

What is significant with the number 750,000?

A

It is the limit that is tax deductible towards the mortgage interest paid.

43
Q

What is significant with the dates between January 1, 2018 and December 31, 2025?

A

Any second mortgage loans taken out between those dates are no longer tax deductible.

44
Q

What happens if I took out a loan before December 14, 2018, but refinanced after that date?

A

The interest paid on the mortgage is then tax deductible.

45
Q

Are mortgage loans taken out prior to December 14, 2018 affected?

A

No. Loans prior to that date are not tax deductible and will not be affected as long as the amount does not exceed 1,000,000.

46
Q

State and local tax can be deducted up to only 15,000. T/F

A

False. It is only 10,000

47
Q

What is the withdrawal limit of an IRA?

A

10,000

48
Q

Is there a withdrawal penalty for IRA?

A

Yes and No. First time home buyers can apply for a penalty free withdrawal up to 10,000. All others will assume a penalty.

49
Q

When a single taxpayer sells their house, how much of their profit can be excluded from their capital tax?

A

A single taxpayer that sells their primary house is able to exclude up to 250,000 of their profit from capital tax as long as they have lived there for 2 years from the 5.

50
Q

Married jointly taxpayers who sell their house, how much of their profit of selling their house can be excluded from their capital tax?

A

Married couple filing jointly who sell their house are able to exclude up to 500,000 of their profit from their capital tax

51
Q

What is Capital Tax?

A

Capital tax is tax on any profit made from and individual’s assets such as selling their house or stock investments.

52
Q

How do you calculate Capital tax?

A

Sale price of House Minus Original Cost

Ex. Sale Price 200,000 - Original cost of Home = 30,000 capital gains

53
Q

How do you calculate Equity?

A

The Market Value of Property - Amount Still Owed

Ex. Market Value 500,000 - Amount Still Owed 180,000 = 320,000 Equity

This can be used to pay remaining mortgage loan balance and other fees. What Remains is yours to keep.

54
Q

Put the objects in the correct order from top to bottom.

  1. The Federal Reserve establishes a discount rate on money it lends to banks
  2. The Government’s monetary policy is established by the Federal Reserve.
  3. The discount rate affects the interest rate that banks charge consumers.
  4. The interest rate on a home loan affects its affordability for the homebuyer
A
  1. Government’s monetary policy is established by the Federal Reserve.
  2. The Federal Reserve Establishes a discount rate on money it lends to banks
  3. The discount rate affects the interest rate that banks charge consumers.
  4. The Interest rate on a home loan affects its affordability for the homebuyer.
55
Q

All of these are examples of government policies that can affect the real estate market EXCEPT

The Federal Reserve Board’s discount rate.

A shortage of skilled labor or building materials.

Land-use controls, such as zoning.

Federal environmental regulations.

A

A shortage of skilled labor or building materials is not a example of government policy

56
Q

Real estate is unique and immobile. This means that?

A

The market adjusts slowly to the forces of supply and demand.

Unit 1 Intro. To Real Estate Business (4 decks)

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