Residential Market Analysis Lecture 4 Residential Market Analysis

Types of Residential Units Single-Family Detached Single-Family Attached Multifamily Housing Manufactured Housing Mobile Homes

Facts of Residential Real Estate Markets Residential structures account for about 24% of the value of all assets owned in the United States (value approximately $6 Trillion) Neighborhood stability often presumed in areas where a high proportion of housing units are owned Average square footage of homes in the U.S. has increased nearly 25% in the last 50 years to approximately 2,200 sf. Approximately 68% of Americans own their home. This percentage has increased from 64% in 1993.

Long-Term Demand for Housing Function of: Number of households Household growth rate General economic productivity of income of the typical household

Long-Term Demand for Housing Year Population Average Household Size Households 1900 76,212,168 4.40 17,320,947 1950 151,325,798 3.47 43,554,000 2000 275,601,802 2.65 104,000,680

Long-Term Demand for Housing People living longer People having fewer children, decreasing household size Divorce rate increase

Regional Demand for Housing Three factors leading to absolute and relative growth in the number of households: Size of the existing population provides momentum to the level of absolute population growth Job growth correlates to the growth in the number of households Overall quality of life and cost of living in a region

Short-Term Demand for Housing Two Dominant Factors: Seasonality Mortgage interest rates

Seasonality: Residential Home Sales Average Monthly Sales Springtime housing sales tend to run 40% higher than in December 120% 100% 80% 60% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Short-Term Housing Demand: Mortgage Interest Rates Rather than buying a cheaper house as rates rise, many buyers choose to wait and hope rates decrease When interest rates are decreasing, many potential buyers wait in hopes that rates continue to decrease, then will purchase when rates increase in fear of continued rate increases.

Lecture 4 Buying Versus Renting

Renting Versus Buying: Initial Misconceptions Not enough capital to purchase Overabundance of square footage Property maintenance and costs

Economic Factors Affecting the Buy/Rent Decision Capital Constraints Expected Tenure Income Tax Rate Mortgage Rate Expectations

Economic Factors Affecting the Buy/Rent Decision Investment Aspects of Homeownership Budgeting Risk Psychological Factors

Government Regulation and Housing Demand Lecture 4 Government Regulation and Housing Demand

Federal Government Regulation Fair Housing Act Redlining Community Reinvestment Act FIRREA RESPA

Lecture 4 Senior Housing

Senior Housing By 2050, the 85 and older population will have increased 300% from year 2000. 1 in 5 Americans in year 2030 will be 65 or older Senior segment of the economy outspends young segment Senior income increased by Social Security and Medicare, etc.

Senior Housing Housing Desires of Seniors To locate near friends, relatives, doctors, hospitals To locate in safe areas To locate near shopping and entertainment To have privacy, and options for socializing

Senior Housing Housing Options for Seniors Active adult community independent living facility housing Congregate housing with assistance Congregate housing with assistance and nursing Skilled nursing homes Alzheimer’s specialized care centers Hospice centers

Lecture 4 Future Housing Trends

Future Housing Trends More workers required to travel, paired with low interest rates, creates a demand for second homes Decrease in brokerage costs from the internet Fast growing market segments: Seniors and households with no children Permanent tenants evolving from changes in upscale rental units