Real Estate Markets

1
Real Estate Markets

• By Floyd Allen
• Summarized by Dr. Jim Burton
• University of West Georgia

2
Overview

• Supply Demand
• Ideal Market
• Real Estate Supply - Improvements
• Defining Real Estate Markets
• Real Estate Supply - Land
• Demand for Real Estate
• Price-Distance Relationships
• Highest Best Use

3
Supply Demand

• Equilibrium prices are directly related to demand
  changes, and inversely to supply changes.
  
• Demand , Prices Demand
• Supply , Prices

4
Ideal Market

• Many Buyers Sellers
• Participants have perfect knowledge
• Products are homogeneous
• Supply is flexible easy to produce
• Purchases are small frequent
• Space is not relevant

5
Real Estate Supply - Improvements

• Supply is fixed in short-run
• Elastic supply of property services
• Changes in supply are small/year
• Additions to supply are based on anticipations of
  future Demand
  
• Costs Financing are vital

6
Defining Real Estate Markets

• Geographic Location - Neighborhood
• Property Type - residential, commercial,
  industrial, or agricultural
  
• Use Type - owner vs. renter
• Degree of Competition

7
Real Estate Supply - Land

• Supply is fixed
• Economic scarcity of Land
• Some Land has high Demand
• 70 of US population lives on 1.6 of land
• Land use restricted by harbors, rivers, lakes,
  wetlands, mountains, climate

8
Demand for Real Estate

• Population
• Income
• Employment
• Changes in Demand
• The Real Estate Cycle

9
Price-Distance Relationships

• Rural worth less than urban
• Convenience to employment shopping
• Shipping costs of goods
• Accessibility
• Availability of utilities
• Highest Best Use

10
Highest Best Use

• Physically practical
• Legally permissible
• Financially feasible
• Maximum profit (net income)
• As if Vacant As improved
• Interim Use