Basic Appraisal Principles Ch 16: Market Analysis
Submarket
A division of a total market that reflects the preferences of a particular set of buyers and sellers, e.g. fast food restaurants as a submarket of the overall restaurant market.
Market study
A macroeconomic analysis that examines the general market conditions of supply, demand, and pricing or the demographics of demand for a specific area or property type. A market study may also include analysis of construction and absorption trends.
Marketability study
A microeconomic study that examines the marketability of a given property or class of properties usually focusing on the market segments in which the property is likely to generate demand. Marketability studies are useful for determining a specific highest and best use, testing development proposals, and projecting an appropriate tenant mix.
Market analysis
A process for examining the demand and supply of a property type and the geographic market area for that property type.
Market Analysis
A process for examining the demand for and supply of a property type and the geographic market area for the property type.
Market Analysis--Study of Supply and Demand
A property type Particular Property Characteristics The most probably users of this type of property (demand) Available competing properties (supply)
Existing housing stock
Always and appraiser's starting point
Feasibility analysis
An analysis undertaken to investigate whether a project will fulfill the objectives of the investor. The profitability of a specific real estate project is analyzed in terms of the criteria of a specific market or investor, often interchangeable with investment analysis. Both studies forecast property revenues and expenses. Feasibility analysis is more often undertaken as part of a highest and best use study for a proposed property use.
Real estate market
Buyers and sellers of particular real estate and the transactions that occur among them.
Supply Analysis
Existing stock Volume of New Construction Planned Construction (new building permits) Availability and price of vacant land Costs of Construction Properties offered for sale Conversions in progress Availability of financing
Microeconomics
Focuses on the economics of industrial firms, industries, and consumer segments.
Demand analysis
Identifying the most probably user for a particular type of proeprty.
Mortgage Information
Interest Rates Amount of down payment
Employment Types and Patterns
Manufacturing Government Services Retail and Small Business Trends Availability of Skilled Labor High Tech Education Tourism and Recreation
Population trends
Not in supply analysis.
Demand Analysis
Population Trends Employment types and patterns Mortgage information Physical factors Income & wage levels Unemployment rates Land use patterns Local government
Demand Analysis
Population of the demand area Per capita and household income Percentage of household income spent on retail purchases Rates of sales' retention in the trade area Vacancy rates in the market area Transportation facilities Land use patterns and the direction of growth
Census Bureau Website > American Factfinder > census.gov > Data > American Factfinder
Population, Household Size, Housing Units (total rented, vacant), Labor Force, Median Housing $, Ages, Family Size, Education Levels, Median Income, Mortgage Interest
Population trends example
Predictions show your town will grow by 1000 people over the next 5 years. If the average household consists of two people, they will require 500 dwelling units. If 70% of them buy a dwelling, that will mean they absorb 350 units. There will also be a demand for 150 units of rental. *Percentage of population change over x years *Positive or negative *Compare with other areas *Age demographics *Projections *Census Bureau
Supply analysis
Researching and analyzing the number of new building permits issued is primarily an element of
Physical Factors
Some natural features may preclude future development: Rivers, swamps & wetlands, canals & waterways, canyons
Absorption Period
The actual or expected period required from the time a property, group of properties, or commodity is initially offered for lease, purchase, or use by its eventual users until all portions have been sold or stabilized occupancy has been achieved.
Market area
The area associated with a subject property that contains its direct competition.
Subject property market area
The area that contains its direct compeition.
Disaggregation
The differentiation of a subject property from other properties on the basis of subclassifications with differing product characteristics.
Market Area Analysis
The objective analysis of observable and/or quantifiable data indicating discernible patterns of urban growth, structure, and change that may detract from or enhance property values, focuses on four sets of considerations that influence value: social, economic, governmental, and environmental factors.
Market segmentation
The process an appraiser would use to identify submarkets within a larger market.
Market Segmentation
The process by which submarkets within a larger market are identified and analyzed.
Absorption Rate
The rate at which properties for sale or lease have been or are expected to be successfully marketed, sold, or leased in a given area over a duration of time.
Microeconomics
The study of the economics of individual spheres of activity or patterns and behaviors, e.g. a firm, an industry, a retail market, a consumer segment, pricing, local employment.
Availability of financing
This should also be considered as a part of supply analysis because builders and developers need to be able to obtain financing in order to build homes or buildings.
Income and Wage Levels
bls.gov ---Example: New subdivision w/$500,000 houses identify the amount of income that is required to purchase. Then identify what segment of the market or % of families that can afford it.
New construction starts
nahb.org (National Association of Home Builders) > Housing Data > Construction Starts > State and Local Data