Ch. 16 Market Analysis

What factors do we investigate in 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

What are some factors that may be researched and analyzed in demand analysis for commercial properties?

-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

What are some factors that may be researched and analyzed in demand analysis?

-Population trends -Income and wage levels -Employment types and patterns -Unemployment rates -Mortgage information -Land use patterns -Physical factors -Local government

To analyze almost any market we must study supply and demand factors. We need to identify: 1)A property type 2)Particular property characteristics 3)The most probable users of this type of property 4)Available competing properties Which of these represent supply and demand?

3) The most probable users of this type of property (demand) 4) Available competing properties (supply)

What is a feasibility analysis?

A feasibility analysis for an investor would result in an opinion of investment value. That is the value of a property to a particular investor, according to his or her own particular investment criteria. A feasibility analysis often is conducted as part of a study in determining highest and best use.

Define market analysis.

A market analysis, in general, studies the market for any particular economic good. We, of course, are interested in the market for real estate.

What is a marketability study?

A microeconomic study that examines the marketability of a given property or class of properties, usually focusing on the market segment(s) in which the property is likely to generate demand. Marketability studies are useful in determining a specific highest and best use, testing development proposals, and projecting an appropriate tenant mix.

In an urban market, an appraiser may note a trend of converting A) apartments to condominiums B) large single-unit homes to multi-unit apartments C) apartments to co-ops D) all of these

D) all of these

Which of the following would NOT be considered in supply analysis? A) existing stock B) conversions in progress C) properties offered for sale D) population trends

D) population trends

Explain market area analysis.

First an appraiser identifies the market area. The analysis must be objective and based on real data. This data also must be observable, quantifiable, and discernible. It also should be capable of verification. This analysis studies how four considerations that influence value: social, economic, governmental, and environmental factors, enhance or detract from property values.

What website is helpful for finding a lot of the demand factors you need in one place?

It is a service provided on the Bureau of the Census website, called American Factfinder. It can be accessed from the main Census Bureau webpage by going to the "Data" tab at the top center of the page, and then clicking on "American FactFinder".

What is market study?

Market studies concentrate on market trends. A market study might be undertaken by a developer prior to planning a new development or project. A macroeconomic analysis examining the general market conditions of supply, demand. and pricing or the demographics of demand for a specific area or property type. May also include analyses of construction and absorption trends.

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 is the definition of ____.

Microeconomics

Define microeconomics in regard to real estate.

Microeconomics focus on a local market. The governmental, economic, social, and environmental forces that occur at the neighborhood or market area level.

What is an 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.

What is disaggregation?

The differentiation of a subject property from other properties on the basis of subclassifications with differing product characteristics. This is the actual process by which we would separate and define some markets. You need to think through all the factors and the characteristics of the properties that are pertinent. Pick the three or four most important factors that you are trying to analyze. Find the most important of the influences on value that would sway a potential buyer in one direction or another.

What is segmentation?

The process by which submarkets within a larger market are identified and analyzed.

What is an 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. This is an estimate for the demand for property in a given area.

Define macroeconomics in regard to real estate.

This is the big picture! Major factors on a national or regional level that impact real estate in general. These factors tend to impact all properties equally, and are applicable to all kinds of real estate. Ex: Being in a time of rising inflation, the actions of the Federal Reserve Board, the country being in a "boom" time, etc.

What is a submarket?

We may have a market that could be defined as all the residential properties in the town or county. Within that total residential market there could be submarkets that consist of: -Single-unit -Two- to four-unit -Multi-unit -Old houses -New houses -Starter homes under $100,000 -Mid-range homes between $100,000 and $300,000 -Luxury homes in excess of $300,000 -Condominiums -Apartments -Townhouses -Suburban houses -Rural houses

Income and wage levels in a market area are important to consider. What information do you need to compile to determine the demand for a property (based on income and wage levels)?

You need to identify the amount of income that typically would be required to purchase a property. Then identify what segment of the market or percentage of families in that market area would have the means to purchase this property.

"The rate at which properties for sale or lease have been or are expected to be successfully marketed in a given area; usually used in forecasting sales or leasing activity" is the definition of a(n) __________ rate.

absorption

Identifying the most probable user for a particular type of property is a component of ___________ analysis.

demand

An analysis undertaken to investigate whether a project will fulfill the objectives of the investor is a(n) ___________________ analysis

feasibility

"A process for examining the demand and supply of a property type and the geographic market area for that property type" is the definition of ____________ analysis.

market

"The process by which submarkets within a larger market are identified and analyzed" is the definition of ____.

market segmentation

What process would an appraiser use to identify submarkets within a larger market?

market segmentation

A subject property's market area would be defined as

the area that contains its direct competition

A subject property's market area would be defined as ____.

the area that contains its direct competition