1. Real Estate Principles and Practices Chapter 1 Real Estate and the Economy © 2010 by South-Western, Cengage Learning

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

3. © 2010 by South-Western, Cengage Learning Overview Real Estate impacts economy, community and society Economic Base

4. © 2010 by South-Western, Cengage Learning Housing Needs Population Growth Housing for Senior Citizens Population Characteristics Analysis of demographics Changing family definition

5. © 2010 by South-Western, Cengage Learning Contribution to the Economy ¾ of Nations wealth Residential – largest number of units Rights and benefits of real property ownership Taxation Corporations establish businesses and factories Blighted areas reclaimed

6. © 2010 by South-Western, Cengage Learning Real Estate Creates Employment GNP: Gross National Product Study of Economics: production, circulation and use of income, wealth, and goods Specialization

7. © 2010 by South-Western, Cengage Learning Real Estate Creates Employment Plotting of Subdivision Heavy Equipment Operators General Contractors, Subcontractors, Builders, Material Suppliers Appliances & Furnishings Housing Industry

8. © 2010 by South-Western, Cengage Learning Real Estate Creates Employment Services: Savings and Loans Title Companies Insurance Companies Appraisers Attorneys City Offices Nurseries Local, state and federal governments

9. © 2010 by South-Western, Cengage Learning Real Estate Creates Employment Local governments: land use planning / zoning HUD Licensed Real Estate Professionals

10. © 2010 by South-Western, Cengage Learning Purchasing a Home Home selection: Location Style Condition Size Proximity to: Public transportation Schools Shopping Employment

11. © 2010 by South-Western, Cengage Learning Purchasing a Home Socioeconomic Contributions: School system Churches Neighborhood Associations Politics Consumers

12. © 2010 by South-Western, Cengage 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

13. © 2010 by South-Western, Cengage Learning How Economic Conditions Affect Real Estate Business cycles Economic conditions affect real estate values Buyer’s and Seller’s markets are created locally

14. © 2010 by South-Western, Cengage Learning How Economic Conditions Affect Real Estate Supply and demand: strong force in determining market value American dream: “owning a piece of the earth”

15. © 2010 by South-Western, Cengage Learning How Economic Conditions Affect Real Estate Need creates demand Demand creates value Issues creating value Government laws governing legal rights Location Productivity

16. © 2010 by South-Western, Cengage Learning Economic Base Land produces our nations' 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

17. © 2010 by South-Western, Cengage Learning The 1980’s, the 1990’s and into the 21 st Century 1980’s – fluctuated up and down Deficit of the federal government Collapse of S & L’s Farm bankruptcies and halt to inflation Tax Reform Act of 1986 1987 Stock market plunge Fluctuating interest rates

18. © 2010 by South-Western, Cengage Learning The 1980’s, the 1990’s and into the 21 st Century 1990’s – 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

19. © 2010 by South-Western, Cengage Learning The 1980’s, the 1990’s and into the 21 st Century 21 st Century Stock market plummeted Corporations filed bankruptcy Inters rates lowered Foreclosures