1. 1 The Real Estate Market Chapter 19 Florida Real Estate Principles, Practices & Law Copyright 2013 Kaplan, Inc.

2. 2 Three Key Questions What will be produced? –The consumer decides Who will do the producing? –The most efficient producer of a comparable-quality product Who will get what is produced? –Those persons who have dollars and are willing to spend them (buying power)

3. Copyright 2013 Kaplan, Inc. 3 Characteristics of the Real Estate Market Immobility of real estate –Fixed location Market is slow to respond to change in supply and demand Land is indestructible –Structures have long life spans Real estate is unique –Heterogeneity Government controls influence the market through zoning, building codes, taxes –Both direct and indirect influences

4. Copyright 2013 Kaplan, Inc. 4 Variables that Influence Supply The amount and type of real estate for sale or rent at differing price levels availability of –Skilled labor –Construction loans and financing –Land Scarcity of usable land Laws regulating use –Materials

5. Copyright 2013 Kaplan, Inc. 5 Variables that Influence Demand Desire and ability to purchase or rent goods and services –Price of real estate Change in price results in an inverse change in demand –Population numbers and household composition Household is any person or group of persons occupying separate housing space –Income of consumers –Availability of mortgage credit (barometer of the real estate market) Small change in interest rates creates large change in monthly payment –Consumer tastes and preferences

6. Copyright 2013 Kaplan, Inc. 6 Buyers vs Sellers Market Buyers market –Supply exceeds demand –Buyers get better prices and terms Sellers market –Demand exceeds supply –Sellers able to sell for higher prices

7. Copyright 2013 Kaplan, Inc. 7 Interpreting Market Conditions Market indicators Price levels of new home sales and number of building permits Vacancy rates –Percentage of available rental units that are not occupied

8. Vacancy and Occupancy Rates A apartment building has 120 units of which 10 are unoccupied. What is the buildings vacancy rate? 10 ÷ 120 =.083 (8.3%) Vacancy Rate Another apartment complex has 528 units of which 502 are rented. What is the occupancy rate for the complex? 502 ÷ 528 =.95 (95%) Occupancy Rate Copyright 2013 Kaplan, Inc. 8

9. Interpreting Market Conditions Market Indicators Sales volume number and prices of homes sold –Multiple listing services Copyright 2013 Kaplan, Inc. 9