Real Estate Principles and Practices Chapter 1 Real Estate and the Economy © 2014 OnCourse Learning

Key Terms Business cycles Economic base Free enterprise Gross national product (GNP) Open market system Ownership cycle

© 2014 OnCourse Learning Overview Real Estate impacts economy, community, and society Economic Base

© 2014 OnCourse Learning Housing Needs Population Growth Housing for Senior Citizens Population Characteristics Analysis of demographics Changing family definition

© 2014 OnCourse Learning Contribution to the Economy ¾ of Nation’s wealth Residential – largest number of units Rights and benefits of real property ownership Taxation Corporations establish businesses and factories Blighted areas reclaimed

© 2014 OnCourse Learning Real Estate Creates Employment GNP: Gross National Product Study of Economics: production, circulation, and use of income, wealth, and goods Specialization

© 2014 OnCourse Learning Real Estate Creates Employment Plotting of Subdivision Heavy Equipment Operators General Contractors, Subcontractors, Builders, Material Suppliers Appliances & Furnishings Housing Industry

© 2014 OnCourse Learning Real Estate Creates Employment Services: Savings and Loans Title Companies Insurance Companies Appraisers Attorneys City Offices Nurseries Local, state and federal governments

© 2014 OnCourse Learning Real Estate Creates Employment Local governments: land use planning / zoning HUD Licensed Real Estate Professionals

© 2014 OnCourse Learning Purchasing a Home Home selection: Location Style Condition Size Proximity to: Public transportation Schools Shopping Employment

© 2014 OnCourse Learning Purchasing a Home Socioeconomic Contributions: School system Churches Neighborhood Associations Politics Consumers

© 2014 OnCourse Learning How Economic Conditions Affect Real Estate Free Enterprise The more you produce the more you receive Open Market System Consumers decide what they want Producers compete to supply those needs Competition = improved products

© 2014 OnCourse Learning How Economic Conditions Affect Real Estate Business cycles Economic conditions affect real estate values Buyer’s and Seller’s markets are created locally

© 2014 OnCourse Learning How Economic Conditions Affect Real Estate Supply and demand: strong force in determining market value American dream: “owning a piece of the earth”

© 2014 OnCourse Learning How Economic Conditions Affect Real Estate Need creates demand Demand creates value Issues creating value Government laws governing legal rights Location Productivity

© 2014 OnCourse Learning Economic Base Land produces our nation’s goods Sound economic base results from production of commodities or services Broad economic base better than one industry Cities offer concession to large businesses for relocation

© 2014 OnCourse Learning The 1980s, the 1990s and into the 21 st Century 1980s – fluctuated up and down Deficit of the federal government Collapse of S & L’s Farm bankruptcies and halt to inflation Tax Reform Act of Stock market plunge Fluctuating interest rates

© 2014 OnCourse Learning The 1980s, the 1990s and into the 21 st Century 1990s – fluctuated up and down Low interest rates - recessionary economy Property values corrected – interest rate fell Rates increased to ward off inflation Economic growth – interest rates lowered Record home sales

© 2014 OnCourse Learning The 1980s, the 1990s and into the 21 st Century 21 st Century Stock market plummeted Corporations filed bankruptcy Inters rates lowered Foreclosures