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Appraisal - General > Section 3 Market Analysis > Flashcards

Section 3 Market Analysis Flashcards

1
Q

4 stages of a real estate cycle

A

expansion, contraction, recession & recovery

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2
Q

Expansion

A

demand & occupancy grow, rents exceed replacement costs, entrepreneurial incentive is high so construction increases

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3
Q

Contraction

A

demand grows slowly, new construction exceeds demand, occupancy is high but declining, profit declines

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4
Q

Recession

A

demand is stagnant or decreasing, rents decline, concessions, profit potential is low, new construction declines or halts

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5
Q

Recovery

A

demand and occupancy climb, rents stabilize, profit gains strength but no new construction

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6
Q

Market equilibrium

A

balance between supply & demand, markets move to equilibrium but balance seldom occurs for long

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7
Q

Feasibility rent

A

rent required to induce new construction

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8
Q

Equilibrium rent

A

the rent a property is expected to bring when a market is at equilibrium

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9
Q

Economic base analysis

A

a study that the determines an economy’s basic and non basic industries

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10
Q

Basic industry

A

exports goods & services (brings money in)

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11
Q

Non-basic industry

A

imports goods & services (sends money out)

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12
Q

Location quotient

A

determines if an industry is basic or not. Location quotient over 1 is basic

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13
Q

How do you calculate a location quotient?

A

job in area/same job in US divided by all jobs in area/all jobs in us ie: 107/1000 = 10.7% 30,000/1,000,000 =3%
10.7%/3% = 3.5 LQ (basic!)

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14
Q

Market segmentation

A

the process of identifying smaller portions of a larger market for both supply and demand

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15
Q

Linkage

A

the time distance relationship between a particular use and its supporting facilities.

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16
Q

Key linkages - single family

A

schools, commute times, shopping

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17
Q

Key linkages - multi family

A

employment nodes, transportation nodes, location conveniences

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18
Q

Key linkages - office

A

commute times, lodging, retail amenities (food, fitness)

19
Q

Key linkages - industrial

A

truck routes, suppliers

20
Q

Key linkages - retail

A

conveniences to residential districts, household income, demographics

21
Q

Market study

A

macroeconomic analysis of a specific area or property type

22
Q

Marketability study

A

microeconomic analysis of the marketability of a specific property or class of properties

23
Q

Projection

A

inferred demand analysis - prediction that assumes the past will continue into the future

24
Q

Forecast

A

fundamental demand analysis - prediction that considers change in supply & demand

25
Q

Inferred Demand Analysis

A

a projection based on current market conditions and recent historical change (no pent up/artificial demand, one property type)

26
Q

Fundamental Demand Analysis

A

considers past and expects changes in PIE population, income & employment

27
Q

What are the main differences between inferred demand analysis and fundamental demand analysis?

A

inferred does not recognize significant change, fundamental does

28
Q

how do you choose an appropriate market analysis

A

CSS - complexity, size and market stability

29
Q

Level A market analysis

A

Inferred, simple, small property in a stable market, value now

30
Q

Level B market anaysis

A

Inferred, (any one of the following) - large, complex, unstable market, timing now.

31
Q

Level C market analysis

A

Fundamental - use w/ 2 or more - large, complex, unstable market, timing not now

32
Q

4 ingredients needed for an actual market and which one isn’t needed for a potential market

A

Demand, Supply & Prices - Transactions too for an actual market.

33
Q

6 step Process of Market Analysis

A
  1. Property productivity analysis, 2. Delineate the market area & CMA, 3. Predict demand, 4. Predict supply (current & Future) 5. Compute net/marginal demand 6. Predict subject’s capture (3-4=5)
34
Q

Identify property productivity

A

step 1 - describe property - physical, legal & locational (PLL)

35
Q

Delineate the market

A

step 2 - boundries (natural/man made & politcal), what’s needed, what’s changing, market conditions

36
Q

Identify Market conditions

A

step 3 - interest rates, supply & demand changes, changes in PIE (population, income, employment)

37
Q

Measured Demand

A

the amount of space a market needs at 100% occupancy

38
Q

Frictional vacancy

A

allows orderly movement of tenants

39
Q

What is supportable demand and how do you calculate it?

A

Measured demand plus an allowance for frictional vacancy. Measured demand /(1-frictional vacancy) Demand 600 and vacancy 5% (600/0.95 = 632)

40
Q

What is supply analysis (step 4) and how do you calculate supply -

A

Supply includes existing supply, new construction, planned new supply and demo & conversions.

41
Q

Excess supply - what is it and how do you calculate it?

A

Step 4 - If there is excess supply: existing supply less frictional vacancy =s current demand/occupancy. subtract from existing supply to get the excess supply

42
Q

Supply to absorb - not enough supply

A

Step 4 - For a specific property! Existing supply less stabilized vacancy = current demand. Subtract from existing supply to get space to absorb.

43
Q

Predict subject capture

A

step 5 - the % of marginal demand that a specific proeprty is expected to attract or lose. Pro Rata share method - subject size/competitive size

Appraisal - General (6 decks)

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