Unit 4

Political factors

Counties regulate and enforce building codes, health codes, and safety codes, and provide water, recreation, libraries, public housing, transportation, and other services that affect a local community. Environmental regulations affect the way in which a region is developed

equilibrium

Expansion peaks when demand and supply grow at the same rate

Household Demographics

Family size and household makeup impacts demand in any given area. Neighborhoods that have more children usually increase demand for properties with more bedrooms.

Physical Issues to Consider in a Regional Analysis

Fresh water supplies • Climate• Air and water pollution and control • Waste disposal facilities • Existence and protection of natural scenic beauty • Public transportation facilities • Available open spaces • Available utilities • Natural harbors or waterways • Airports • Freeways and streets • Commercial centers

market analysis

Study of economics, demographics, absorption rates, and other factors to determine supply and demand, market trends, and other factors important to buying, selling, and leasing real property

trough

The lower turning point of a business cycle.

Location

a major factor in the demand analysis.

variance

a request for a deviation from the zoning code for a particular development standard because of unusual circumstances associated with a particular site.

building moratorium

a temporary suspension of new building construction in order to control growth. The reason for this might be the inability of the city or county to provide the necessary infrastructure to accommodate the new growth—water, sewers, waste management, roads, schools, and fire protection

market rent analysis

an evaluation that determines how much rent a property can yield given the current conditions and competing properties within the market area.

expansion

an increase in the pace of economic activity

Trends

are changes in the market in a consistent direction that occur over a long-term period

neighborhood

area delineated by geographical or political boundaries that is comprised of properties that have complementary land uses

market area

areas where market participants live and work. Market areas can include neighborhoods, cities, counties, regions, or combinations of these areas.

trends

changes in the market in a consistent direction that occur over a long-term period.

rental survey

compares rents from competitive properties to determine the market rent. A rental survey will provide a reliable estimate of the appropriate rental rate for a particular unit or space.

regional analysis

considers the physical, economic, political, and social aspects of the region

absorption analysis

estimates the square footage that can be absorbed by the market for a specific type of property. Absorption is important since a flood of new units and office space creates an imbalance in supply and demand

principle of substitution

indicates that a tenant will not pay more to lease a space than for equivalent properties in a given market area. This economic principle is used when preparing a rental survey

Price point

is a point on the scale of possible prices at which a property might be marketed.

economic base

is measured by the number of sources for products

principle of supply and demand

is the basis for analysis of any market economy.

Scarcity

is the lack of supply of some type of real property, which results in increased values (demand exceeds supply

Va lue

is the monetary relationship between properties and the individuals who buy, sell, or use those properties.

absorption rate

is the rate at which a type of property is leased (absorbed) by the market

supply

is the total amount of a given type of property for sale or lease at various prices and at any given point in time.

comparative property analysis

looks at the specific attributes of a particular property compared against the competition. The analysis considers aspects of the property, such as location, condition, design, amenities, common area, size of units, number of units, and occupancy levels. The value of each feature is determined by the use of a side-by-side analysis of the property and its closest competition.

Neighborhood Boundaries

major traffic corridors—freeways or city streets... natural, such as a stream or creek bed, hills, or a heavily forested area.. different political jurisdiction or school district.

absorption period

measured by observing the number of units or square feet that lease during a given period of time. The time can be weekly, monthly, semi-annually, yearly, or some other defined period.

Saturation

occurs when a product is widely distributed in the market area as the result of widespread competition to market and sell the same product (supply exceeds demand).

cycles

periodic, irregular up-and-down movements in economic activity that take place over a period of two to six years. expansion followed by contraction

Housing starts

refer to the number of new dwellings begun nationwide during a particular period. Monthly reports are available from the U.S. Census Bureau

contraction

slowdown in the pace of economic activity

Demographic information

statistics about the size and distribution of the population, including average incomes, levels of education, and spending habits of people living in the local area surrounding a residential or business community.

property analysis

study to determine if a certain type of property is marketable based on the local or regional economy, demand, pricing, and demographics.

principle of competition

that rental rates are affected by supply and demand because of competition. The competition between renters drives the demand for available property

Demand

the amount of a type or style of real estate sought after in a specific market area for a given period. Lower inventories demand a higher price and larger inventories will demand a lower price

contraction phase

the output of goods and services declines, employment falls, unemployment rises, and new construction declines

Per capita income

the total income of an area divided by its total population

Purchasing power

the value of money, measured by the amount of goods it can buy.

leading indicator

they detect trends in the economy looking forward

peak

upper turning point of a business cycle

Typical Residential Demographic Information

• Average age • Education • Employment • Median incomes/median household incomes• Number in household • Occupations • Population counts • Type, number, and price of housing units

Demographic Information for Business

• Census demographics • Income and sales data of the competition • Local competition in same industry • Local demographics • Population demographics • Target marketing information • Traffic counts • U.S. demographics

Neighborhood Physical Characteristics

• Convenience of shopping, schools, places of worship, playgrounds, and major traffic arteries • Utilities, including water, electricity, natural gas, and storm and sanitation systems • Building size, type, and density • Lot sizes and building setbacks

Social Issues to Consider in a Regional Market Analysis

• Law and order • Individual responsibilities • Welfare programs • Community improvement programs • Mixtures of cultural, social, and economic groups • Recreation • Local social services • Assistance programs • Support services for seniors and disabled persons • Business resources

Neighborhood Characteristics

• Local rental rates • Location• Development and growth rate • Trend of property values • Supply and demand of similar properties • Marketing time • Daytime and nighttime population counts • Local demographics • Present land-use percentage • Land-use change

Economic Considerations - Neighborhood Analysis

• Per capita income • Ratio of homeowners to renters • Property rental levels and recent trends • Vacancy rates for different property types • Amount and type of new development and development currently in progress

Social Considerations

• Population density is becoming more important as high-density areas are being developed for mixed commercial and residential use • Demographics, including skill levels, are important to industrial or high technology districts and could have an effect on future job markets • Community improvement programs, neighborhood block clubs, and crime watch groups reflect pride of ownership or, on the flip side, the fact that these programs exist may be evidence of a local problem or concern

Political Considerations - Neighborhood Analysis

• Property tax burden • Special assessments

Economic Issues to Consider in a Regional Market Analysis

• Quality and diversification of basic consumer industries • Quality and diversification of defense-oriented industries • Population projections • Quality and quantity of institutions of higher learning • Opening and closing of strategic military bases • Job opportunities • Commuting time • Tax base sufficient to provide needed government services • Per capita income sufficient to support the tax base and to maintain maximum property values and rental rates

Political Issues to Consider in a Regional Market Analysis

• Regional government controls • Building codes • County services • Cooperation among local government jurisdictions in solving inter-city problems • Zoning ordinances • Building permits • Planning and development

Steps to Prepare a Rental Survey

• Review market rental and occupancy rate trends • Select comparable properties and gather rental data from those properties • Compare features and amenities of the comparables to the managed property • Adjust rental rates based on the differences of the features and amenities • Determine current market rental rate