1. Fundamentals of Real Estate Market Analysis
Notes on Appraisal Institute publications including Stephen F. Fanning (2014), “Market Analysis for Real Estate,” Second Ed.
Prepared by John Clapp
2017
Ran is postdoc. WP stage. Want critical comments

2. There are four categories of influences on real estate markets
Social – example: renters in a given local office market want more security services in the building
Economic – example: rising local employment increases rent and reduces vacancy
Governmental such as building and zoning codes
Environmental, physical and geographic influences such as asbestos or lead paint used in constructing the building

3. Examples of Social Influences on Value
The subject property is in an office market where architecture is important – e.g., the distinctive design of some buildings in midtown Manhattan. But the subject architecture is not distinctive or even gives a poor first impression.
A single family detached home is located in a neighborhood that has been redeveloped to higher density condominiums. Most people moving into the neighborhood are looking for low maintenance residences, so the detached home has experienced some loss in value
F simplified to income and other aspects of F controlled in regs. Most volatility from HPI. CT is generally slow growing state; supply constraints might explain high mean HPI/Income. Also growth from NYC – superstar city = “new era” story

4. Examples of Economic Influences on Value
High unemployment rates in a city will cause the risk of mortgage borrowing or lending to increase.
An apartment building is in a local market that experienced a building boom over the past 5 years. The oversupply has caused rents and market values to decrease.
The subject site is a multitenant retail building. The area has experienced a significant increase in employment because of expansion of the biotechnology industry. This has increased the number of households, the amount of income and sales within the shopping center.

5. Examples of Governmental Influences on Value
The subject is located in an area where there is no zoning, or the zoning is often not enforced when it is violated. This creates additional risk to marketability and value because somebody could put an adverse use near the subject.
The subject is a residential apartment building located in an area where there is a moratorium on all new construction because of capacity problems with treating sewage. Most likely this reduces future supply and increases the rents and value of the subject

6. Examples of Environmental, Physical and Geographic Influences on Value
The subject is located next to a busy highway
Brokers report that their ability to market (i.e., marketability of) the subject is limited because it is too far from employment centers
The subject site includes two areas designated as wetlands. State law makes it difficult to develop the site because the wetlands must be replaced with designated wetlands someplace else.
Lead paint is present in most structures built before 1978 and exposure to it (e.g., a child eating a lead paint chip) can cause brain damage. Lead paint can be encapsulated, but complete removal is very expensive. The presence of lead paint reduces rents and value.