© 2009 by South-Western, Cengage Learning SAMIRLANDER Chapter 19

Florida Real Estate: Principles, Practices and License Law Chapter 19 The Real Estate Market © 2009 by South-Western, Cengage Learning

Key Terms Buyer’s market Demand Household Seller’s market Supply Vacancy rates

© 2009 by South-Western, Cengage Learning Physical Characteristics of Real Estate 1. Immobility: fixed location 2. Markets are slow to respond to supply and demand

© 2009 by South-Western, Cengage Learning Physical Characteristics of Real Estate 3. Indestructibility of land: land is permanent 4. Heterogeneous: each parcel is unique

© 2009 by South-Western, Cengage Learning Physical Characteristics of Real Estate 5. Government controls: Zoning, building codes, taxes, money supply, etc.

© 2009 by South-Western, Cengage Learning Economic Characteristics of Real Property Demand: Demand: Desire to own Purchasing power High demand – prices rise Greater availability of property – prices fall

© 2009 by South-Western, Cengage Learning Economic Characteristics of Real Property Population and Households Household: Household: space designed for dwelling purposes occupied by one or more persons

© 2009 by South-Western, Cengage Learning Economic Characteristics of Real Property Population and Households Population increases the need for: Schools Hospitals Office space Government buildings Recreational facilities

© 2009 by South-Western, Cengage Learning Economic Characteristics of Real Property Consumer Income Income trends can make or break real estate markets High unemployment: reduced demand

© 2009 by South-Western, Cengage Learning Economic Characteristics of Real Property Availability of Mortgage Funds Demand is dependant on availability of borrowed funds Low rates – values increase High rates – values decrease

© 2009 by South-Western, Cengage Learning Economic Characteristics of Real Property Example 1 Loan amount: $500,000 Interest Rate: 10% Term: 25 years Monthly payment: $4, Example 2 Loan amount: $500,000 Interest rate: 9% Term: 25 years Monthly payment: $4,195.98

© 2009 by South-Western, Cengage Learning Economic Characteristics of Real Property Consumer Preferences Architectural styles: Cape code Ranch Split-level Single family detached housing Cooperative high rise Condominium high rise

© 2009 by South-Western, Cengage Learning Economic Characteristics of Real Property Supply Supply: amount of housing stock of properties available for sale or lease

© 2009 by South-Western, Cengage Learning Economic Characteristics of Real Property Residential construction Electricians Plumbers Carpenters Roofers Masons

© 2009 by South-Western, Cengage Learning Economic Characteristics of Real Property Commercial construction Steel workers Heating and air- conditioning contractors Sheet rock contractors

© 2009 by South-Western, Cengage Learning Economic Characteristics of Real Property Construction financing: Short term financing Interim loans Long term loans Take out loans

© 2009 by South-Western, Cengage Learning Physical Characteristics of Real Estate Factors affecting desirability: Zoning and building codes Vast availability may result in stagnant resale market

© 2009 by South-Western, Cengage Learning Economic Characteristics of Real Property Absence of materials increases the cost of construction

© 2009 by South-Western, Cengage Learning I nterpreting Market Conditions Seller’s market: Seller’s market: more buyers than sellers Buyer’s market: Buyer’s market: more sellers than buyers Transition market: end of a buyer’s or seller’s market

© 2009 by South-Western, Cengage Learning I nterpreting Market Conditions New construction permits indicates new housing supply Rental property vacancy Vacancies rise: cheaper to buy Homes for sale increases beyond demand: cheaper to rent Population increase spurs new supply to meet demand

© 2009 by South-Western, Cengage Learning I nterpreting Market Conditions Vacancy rates: Vacancy rates: an indication of market trends Rising rates: buyer’s market Lower rates: seller’s market

© 2009 by South-Western, Cengage Learning I nterpreting Market Conditions Current market determined by homes recently sold Quarterly / semiannual sales Property Type Neighborhood Percent increase or decrease in sales pricing information

© 2009 by South-Western, Cengage Learning I nterpreting Market Conditions Current market determined by homes recently sold Cost per square foot Time on the market