The Real Estate Market

Good morning real estate.

Sales volume is the number and prices of homes sold in the recent past. You to public records or the internet to see houses sold. Use the state doc. tax on deeds to find the price. Tax laws require the price of real estate to be recorded. You can extract info. from the newspaper: ie. type of house, price, location, # sales. MLS helps.

Know how to use the market indicator or it is helpless. High interest rate means high activity. Arrange your database system by subdivision, street, or alphabetically. Pinpoint areas of great activity and forecast future growth. Use a color coded pin to indicate sale price and location. Glance at map shows general price range and sale area. A sales data map can give you info. on direction and rate of growth as well.

When there is excess supply of real property buyer's market erupts. Better terms can be negotiated. Builder's lose profit.

When there is excess demand of real property a seller's market erupts. Seller price goes up. Buyer's forced to compete with available space. Kind of like apartments in New York. Builders build. West Chase is popular. Soho is popular. I wonder how the new St. Pete condos are selling. Rocky Point is popular.

How can I interpret market conditions? Look at price levels, vacancy rates, and sales volume. Pay attention to the building permits issued and price levels of home sales to know the housing supply and demand for certain price ranges.

Vacancy rate is percentage not occupied. Vacancy rates indicate the need for housing in a market area. Increase in vacancy means surplus in housing available. 5% vacancy or 95% occupied means healthy market. If occupancy increases rental rate increases and apartment renters are motivated to buy a home. Their move causes drop in rent and new apartments constructed. A healthy real estate market is apparent when rent occupancy is high and there weren't discounts or programs involved. High occupancy leads to increased rental rate. Increased rent leads to new construction. Real estate market is revived then.

To calculate occupancy of a building # rented units / # units total

For example, assume that 200 apartments are rented in a 250-unit apartment building. What is the building's occupancy rate? 80%

To calculate vacancy of a building # units total / # units vacant

For example, what is the building's vacancy rate if 225 units are rented in a 300-unit apartment building? 75 vacant units. 25% vacancy

The barometer of real estate is the availability and cost of mortgage. Purchase of real property requires two to three times purchasers net income, easy to understand using the mortgage market. Total cost of house unimportant if property tax, insurance, interest, and principal can be paid every month. The amortized principal can be increased or decreased down payment amount and term of loan. Monthly payment has direct impact on demand for housing.  Housing demand decreases in a tight money market because cost of mortgage goes up. Even an increase in 1% drops the demand in housing. Preference and taste affects demand. An architectural design may enjoy brief popularity. Enduring changes in taste occur slowly over time. Green movement has increased demand for energy efficient home. New demand creates new preference and new preference creates more houses of that type built. Changes in demand for condos and vacation homes reflect consumer preferences. A house that an empty nester lives in might be too big and the yard work too exhausting and demanding so maintenance repair and grounds upkeep sometimes better in a maintenance free housing unit like a condo. Small families also like housing units.

Demand affected by modern lifestyles, changes in economic conditions, and reduced family size.

What affects real estate supply and demand?

Marriage, relocation, income increase, family size increase, old age...

Supply is what is available in the real estate market for sale or for rent. Real estate prices differ. Supply is affected by skilled labor, construction loans and financing, land, and materials. You don't want to go build your house out of sticks or straw do you? No. You want concrete and brick and mortar. You want durability. You want design and architecture. You want creative modernity. You need an electrician, a contractor, a carpenter, a painter, and a roofer. Cost of that labor depends on unemployment rates, level of skill required (amateur vs. professional), and the influence of foreign labor. Real estate growth in an area is construction growth. Cost of labor increases because competition goes up. New construction is directly related to short term and long term financing and construction loans available. Supply of housing increases when speculative homes are built are built because of the money being available for cheap. Commercial development increases when money is available for cheap too. Land is limited. Type and location of land is scarce. Scarcity of readily usable land regulations affecting land use and development affect supply of land. Availability of construction materials influences construction. A shortage of drywall in 70's and 80's crippled construction. Construction cost stopped and spiraled.

Demand is the desire and capability to purchase products or rent goods or services. Demand is in a given market at a given time for desired real estate type. What mostly affects demand is price, household population, income, mortgage credit, taste and preference.

Most transactions in real estate are residential transactions. You cannot ignore shelter. Demand for a dwelling depends on population and composition of households in the market. Office building and shopping centers increase when population rises. Counting households and population does not predict the demand for dwelling space.

When real estate price rises demand lowers, and when real estate price lowers demand rises causing an inverse relationship between supply and demand in real estate.

Data concerning construction spending, new home sales, and housing starts are updated monthly. Cool http://www.census.gov/economic-indicators/

Immigration is the number one reason for real estate increase in Florida. Every reason exists to suppose this trend will continue. Demand for new dwelling does not mean each state will share proportionate growth. Immigration and birth are two factors of population. In-migration -- new residents moving from other locations. Increase longevity of elderly and birth increase population, therefore, FL CA and AZ exceptional population gains. Increased demand for housing in FL, CA, and AZ. Retire to FL real estate. Demand trend forecasting can only be realized when the Census is analyzed. Before the 19th century 100 units housed 419 people (4.9 people per household), 2010 census shows decreased household to 2.8 people per household, 190 units to house 490 people, change in household size can cause increase in demand. Demographers study population trends. Demographers predict a further reduction in household size. Household size change will result in increased demand for housing. SINGLES IN OWN DWELLING INSTEAD OF TWO IN ONE DWELLING WITH ADDING TO THE DWELLING WITH KIDS. WE ARE SEPARATING. MORE REAL ESTATE :). Immigrants = real estate. In-migration = real estate. Investing = real estate. Second home = real estate.

Income is directly related to demand. Price is inversely related to change in demand. Income increases so does demand for dwelling space. Change in local employment numbers and salary wage level results in demand for dwelling space and loan considerations.

US Dept. of Commerce Bureau of the Census defines a household as a person or group occupying a separate household space. A household can be a 4-person family in a house, a single adult in an apartment, two unmarrieds in a condo in city center.

A market has many meanings. It can be a market where produce is exchanged between farmers or stock market where shares are exchanged (securities/commodities exchanged). A market can only function when buyers and sellers interact. Many markets use intermediaries between buyers and sellers and this intermediary facilitates the exchange. The real estate market is one such market.

Buyer - intermediary/broker/go-between - seller
Seller - intermediary/broker/go-between - buyer

Buyer's market, demand, seller's market, household, supply, vacancy rate

What makes the real estate market different from the produce market? real property and not vegetables.

Main questions: What's being produced? Who is the producer? Who receives the product?

Anyone can place a product in the competitive market to be exchanged. A consumer will evaluate the cost, quality, and worth of the product and other competing products and services. The profit and products and services sold tells what the consumer prefers. No profit = stop producing. Consumers decide what will be produced not the producers. Products with no attention are replaced by better products. Consumers constantly evaluate products. Say you sell pears and you are competing with pear companies. All the sudden you can produce your pears cheaper, but retain the quality and quantity of your pears. So gradually you sell more and more at that lower price. You decide to expand and sell more pears. Your competition must become as efficient or be forced out of the pear market. The most efficient producer produces. The one with the most money gets the most pears. Whoever enters the market and spends money gets product in return. No one worries about having money and not buying anything. There will always be something to buy. Buy what you have the money to pay for. Don't spend outside your limits. Sellers, buyers, and real estate agents do not determine real property price. The marketplace does. The exchange of real property sets the real property price.

A consumer of something has the freedom of choice (what product to buy) and therefore is the ultimate decider. A consumer is a decision maker. The primary determinants in market is what consumer wants and how much will pay for it (individual consumer desires and decisions). The government makes those decisions in a controlled economy (Cuba and Hitler's Germany) not the consumer. A free system works on its own. A free system is not forced. A free system is not controlled. The Department of Commerce does not need to see which products are selling and which products should be canned. The buying and not buying determines what sells and what gets the boot. In a free economy everyone decides together. Bad products naturally fall away. Good products naturally increase and multiply.

A piece of real estate does not move. A property price and worth does not fluctuate with the drop of a hat. A piece of land is hard to destroy. No two real properties are alike. Zoning, taxes, and building codes are some small ways real property is governed.

Real property is geographically fixed. Land and improvements to land are immobile - as such the surrounding affect the worth of the real estate. Time consuming parts of real estate are design, land acquisition, finance acquisition, site preparation, and construction phases. If the equilibrium of supply and demand are upset, years and years can go by before correction. A piece of land is permanent and construction on a piece of land is durable. Over time both land and property become obsolete and deteriorate. No two tracts of land are identical. There is no standard real estate product. Real estate is not a hair brush. One house next to another house is in a different geographic location. Heterogeneity is the uniqueness in land (diverse in character in content). Government control in real estate differs from government intervention in other markets. Direct control of real estate includes property tax and special assessment tax, zoning, building codes, and health codes. Some indirect controls are monetary policies of the federal government.