Fl. Real Estate Unit 15 Flashcards

Fl. Real Estate Unit 15 Flashcards Physical Characteristics of Real EstateImmobility, indestructibility, and uniqueness (non-homogeneity) Vacancy Ratesis the percentage of rental units that are not occupied.Vacancy rates are one indicator of demand for housing in a certain market area. An increase in vacancy rates in rental housing indicates a surplus of housing space. A 5% vacancy rate (95% occupancy rate) is usually considered indicative of a healthy housing market.As the occupancy rate increases, rental rates tend to increase, and apartment dwellers who have been waiting to buy homes of their own start looking at houses for sale and moving out of apartments. This causes increased apartment vacancies and eventually a drop in rents, as well as a halt in construction of new apartments.One of the first indications of a revived real estate market is an increase in rental occupancies that cannot be attributed to reduced rents or giveaway programs. High occupancy rates lead to increased rents. Increased rents lead to new construction and a revived real estate market.Variables that influence supply-availability of skilled labor-availability of construction loans and financing-availability of land-availability of materials Calculating Occupancy and Vacancy RatesTo calculate the occupancy rate, divide the number of occupied units by the total number of units in the

buildingExample:Assume that 200 apartments are rented in

a 250-unit apartment building. What is the building's occupancy rate?200 rented units ÷ 250 total units = .80 or 80%occupancy rateTo calculate the vacancy rate, divide the number of vacant units by the total number of units in

the building.Example:What is the building's vacancy rate if

225 units are rented in a 300-unit apartment building?300 total units - 225 rented units = 75 vacant units75 vacant units ÷ 300 total units = .25 or 25% vacancy rate Market indicators include price levels, vacancy rates, and sales volume.true. Price levels are indicators of new housing supply and demand for certain price ranges, vacancy rates indicate the need and demand for housing in a certain market, and sales volume can be used in estimating the direction and rate of growth.Situsrefers to prospective buyers' preference for a certain area.A seller's market develops when the supply and demand equilibrium is upset by excess demand.true. Whenever the supply and demand equilibrium is upset by excess demand, a seller's market develops. Whenever the supply and demand equilibrium of a market is upset by

excess supply, a buyer's market develops.

A vacancy rate isthe percentage of unoccupied rental units.Buyer's MarketThe supply of available properties exceeds the demand.Which characteristic does NOT describe the real estate market?Land is homogeneous. no two tracts of land are identical.The land use that generates the MOST income to the land and improvements is called is highest and best use. The highest and best use of land is the use that generates the most return (income) to the land and improvements compared with alternative uses.Immobility of Real EstatePhysical Characteristics of Real Estate The geographic location of real estate is fixed. Because of the immobility of real estate, location largely influences the value of real estate. Real estate value is heavily influenced by changes in the surrounding area.Sales VolumeSales associates can collect information on the number and prices of homes sold during the recent past. Data on the number of houses sold and the sale price of each are available from county public records. From MLS data, licensees can extract information on how many sales occurred, the approximate sale prices, where the properties sold were located, and the types of houses.Nonhomogeneous is a term that refers to the uniqueness of land.true. Real estate is unique. No two tracts of land are identical. The uniqueness of land is called heterogeneity (nonhomogeneous) Interpreting Market ConditionsPrice Levels The changes in price levels of home sales is an indicator of new housing supply and demand for certain price ranges.Price and supply are inversely (oppositely) related.When supply goes down, prices go up (more buyers competing for fewer homes). The supply and demand equilibrium is upset by excess demand (more buyers than supply) and a seller's market develops.When supply goes up, prices go down (fewer buyers are competing for a bigger supply of homes for sale). The supply and demand equilibrium is upset by excess supply (more houses for sale than potential buyers), and a buyer's market develops.The Market Is Slow to Respond to Change in Supply and DemandEconomic Characteristics of Real Estate Design, land acquisition, site preparation, and construction phases of real estate are time-consuming.For this reason, when the equilibrium between supply and demand is upset, it can be years before the imbalance is corrected Economic Characteristics of Real Estate(1) government controls influencing the market through zoning, building codes, and taxes;(2) the market's slow response to change in supply and demand;(3) area preference (situs) influencing the price buyers are willing to pay; and ((4) supply and demand interacting to affect property prices.There are 315 apartments rented in a 350-unit apartment building. What is the building's occupancy rate?is 90%. 315 rented units ÷ 350 total units = .90 or 90% occupancy rate.

Relationship Between Supply, Demand, and PriceEconomic Characteristics of Real Estate In the real estate market, supply and demand interact to affect property prices. In any marketplace, supply and demand are continually adjusting; this causes changes in the price of real estate.When the supply increases relative to demand, prices go down. When demand increases relative to supply, prices go up.Of a 430-unit apartment building, 387 units have been rented out. The building's occupancy rate is 85%.false. 387 ÷ 430 = .90 occupancy rate highest and best useThe use that will give the owners the greatest actual return on their investment Government Controls Influence the MarketEconomic Characteristics of Real Estate Government controls influence the market through zoning, building codes, taxes, monetary policy, and so forth The barometer of the real estate market is considered to be the is cost and availability of credit. The barometer of the real estate market is considered to be the cost and availability of credit.A seller's market occurswhen the supply and demand equilibrium is upset with excess demand (demand exceeds supply).Supplyis the amount and type of real estate available for sale or rent at differing price levels in a given real estate market.The variables that influence supply are listed in the followingVariables That Influence SupplyAvailability of skilled laborNumerous skilled laborers, such as carpenters, roofers, and electricians, are required for construction. The availability and cost of labor depend on such things as unemployment rates, skill levels required, and the influence of foreign labor. When an area is growing rapidly, the growth usually is characterized by much construction with resulting high employment in the construction industry.These conditions cause competition for labor and its cost increases.Availability of construction loans and financingNew construction is directly related to the availability of construction loans and short-term financing.As money becomes more available and less expensive, more speculative homes will be built, increasing the available supply of housing. The same is true for commercial development.Availability of landAlthough land seems physically plentiful, the supply of the type and location of land most in demand is always scarce.Two

factors influence the availability of land:(1) the scarcity of

readily usable land and(2) the regulations affecting its use and cost of development.Availability of materialsThe availability of construction materials influences the supply of new housing. In the late 1970s and early 1980s, the construction industry nationwide was severely crippled by a shortage of drywall. Drywall couldn't be found anywhere.