Real Estate - Chapter 15

It has been determined that the value of three lots, each having a value of $10,000 each, is $50,000 as a single tract parcel. Which concept does this illustrate? A. Attachment B. Parceling C. Plottage D. Appreciation

C

The four factors of production include land, labor, capital, and _____.

Entrepreneurial Ability

The Business Cycle

The real estate market is cyclical in nature and tends to follow the business cycle. The four phases of the business cycle are: expansion, peak, contraction, and trough. Expansion: - Low vacancies. - Increased prices in rent. - Accelerated new constructions. Peak: - Increasing Supply. - Decreasing Demand. - Supply more than adequate to meet demand. - Oversupply. Contraction: - High vacancies. - Decrease prices and rents. - Declining constructions. Through - Supply and demand nearly static. - Increasing demand. - Absorption of excess supply. - Supply not keeping up with demand.

A good balance between supply and demand for residential real estate is indicated when the vacancy rate is approximately ____.

5%

How does the real estate market react to shifts in consumer demand? A. Rapidly B. Slowly C. Not at all D. Through changes in zoning laws

B

Which of the following terms is used to describe the relatively new phenomenon in which small families move into older neighborhoods, renovate the property, and displace poorer residents? A. Putrefaction B. Gentrification C. Stabilization D. Blockbusting

B

What is the correct order of the business cycle phase? A. Expansion, through, peak, contraction. B. Peak, contraction, expansion, through. C. Expansion, peak, contraction, through. D. Peak, through, expansion, contraction.

C

The use that creates the highest value to land is its ___________ and ____________ use.

Highest, Best.

If two or more parcels have a greater value as a single tract than the sum of their individual values as separate sites, their combination results in _____ value.

Plottage

A ______ market exists when there is an excess of demand over supply.

Seller's

An economic term used to identify value which results from the location of a parcel of land is _____.

Situs

The real estate market is _____ to respond to changes in supply and demand.

Slow

Immigration and emigration into and out of a neighborhood are an influence on value that can be categorized as a(n) _____ force.

Social

When estimating supply, it is not necessary to consider which of the following? A. Price B. Availability of materials. C. Availability of skilled labors. D. Availability of land.

A

Which of the following best describes the free enterprise system? A. A market system. B. A centralized system. C. A socialist system. D. A communist system.

A

Which of the following market factors will typically result in increased demand? A. A decrease in prices. B. A decrease in income. C. An increase in mortgage interest rates. D. A decrease in population.

A

The real estate market experiences changes and cycles. What is the term used to describe the phase of the market where there is not enough demand to meet the current over supply of available housing units? A. An inflationary market. B. A buyer's market. C. A seller's market. D. An expanding market.

B

Which external force that affects value is indicated by the number of vacancies in an area? A. Social B. Economic C. Governmental D. Environmental

B

Characteristics Of The Real Estate Market

Because of real estate's unique nature and characteristics, the real estate market differs from the markets for other commodities (products or goods) and is not a centrally organized market exchange. Real estate is indestructible, immobile, heterogeneous, scarce, and relatively permanent. Situs is the economic quality of a parcel of real estate resulting from its physical and economic exposure, and accessibility. Situs value is used to identify the value that results from the location of a parcel of land within a community. Area preference can influence situs value. Combining two or more parcels of real estate under the ownership of one party is known as assemblage. If the combined parcels have a greater value together than they did as separate parcels, the increase in value is known as plottage value. Plottage value is the result of the assemblage. The highest and best use of a parcel of real estate is the legal and possible use that generates the most return on the land and improvements, if any, when compared with alternatives. The highest and best use of the land must be: legally permissible, physically possible, financially feasible, and maximally productive.

The real estate business cycle has four phases with no beginning or end. When at its peak, the subsequent phases, in order, would be ______, ______, and ______.

Contraction, Through, Expansion.

All of the following statements apply to the real estate market, EXCEPT: A. Situs value is value resulting from location. B. Real estate is immobile. C. Each parcel of real estate is unique. D. The real estate market is national in nature.

D

In the real estate market, what is a developer considered to be? A. A lender. B. A competitor. C. A consumer. D. A supplier.

D

In which conditions does market equilibrium theoretically exist? A. When supply exceeds demand. B. When demands exceeds supply. C. When cost and price stabilize. D. When supply and demand are in balance.

D

Two factors that affect real estate market are supply and demand. Which of the following would be a good indicator of the measure of supply versus demand? A. The population of the community. B. Consumer Preferences. C. The asking price of recently listed homes. D. The vacancy rate within the community.

D

What is the correct order in which the criteria for estimating highest and best use should be considered? A. Physically possible, legally permissible, maximally productive, and economically feasible. B. Legally permissible, economically feasible, maximally productive, and physically possible. C. Economically feasible, legally permissible, physically possible, and maximally productive. D. Legally permissible, physically possible, economically feasible, and maximally productive.

D

Which of the following might be indicated if a neighborhood appears to have an abundance of "For Sale" signs and an unusually high number of rentals available? A. Neighborhood growth is continuing. B. A period of revitalization has begun. C. The neighborhood has entered a period of stability. D. Decline in the neighborhood may be indicated.

D

Many visible "For Sale" signs and an increased number of rentals may indicate the neighborhood has entered a period of _____.

Decline

Population, credit, income, and consumer preferences are related to the _____ for real estate.

Demand

The social, economic, governmental, and environmental forces that affect real estate values are referred to as _____.

Externalities.

Price and demand are inversely related. This means that demand will typically decrease as prices _____ and as prices decrease demand will ____.

Increase, Increase.

Physically, real estate is characterized as being ______, ______, and ______.

Indestructible, Immobile, Heterogeneous.

The real estate market can be best described as being _____ and _____.

Inefficient, Unorganized.

The availability of materials, labor, financing, and land are all associated with the _____ of real estate.

Supply

Supply & Demand

Supply is the quantity of an item for sale. Demand is an economic principle that describes a consumer's desire and willingness to pay a price for a specific good or service. Factors of Supply: Materials, labor, construction financing, land, and productivity. Factors of Demand: Price, income of consumers, credit availability, population size, and consumer preferences. Market equilibrium (theoretically) occurs when supply and demand are in balance. A seller's market exists when there are more buyers than sellers. A buyer's market exists when there are more sellers than buyers.

The Free Enterprise System

The free enterprise system is an economic system that operates to produce and allocate (distribute) goods (products) and services. The four factors of production are "CELL": Capital (investment), Entrepreneurial ability (business risk taking), Land, and Labor. No good or service can be delivered to the market without the application of a combination of these four factors.