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Answer 15 question of Eco and Market analysis question in real estate field.
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1) REAL ESTATE MARKETS

(a) Define and identify the economic purpose of: 1) the Property Market and 2) the Asset Market. Identify one exogenous force acting upon each market.

(b) Identify the primary determinants on capitalization rates and their expected directional impacts (positively or negatively correlated) on the cap rate.

(c) How would the asset/property framework explain why a reduction in long-term mortgage rates has the opposite impact on residential market values than a reduction in short-term rates.

(d) Many expect long term interest rates to rise after Covid subsides. Explain the impact on market values, rents, and construction. Include the role of linkages across markets in determining the combined impact on the sector as a whole. A diagram is not required, but you may find using one helpful.

2)
URBAN ECONOMICS AND ECONOMIC BASE THEORY

a. Define Agglomeration and explain why it is often characterized as the source of urban efficiency.
b. Describe the multiplier process and its significance to growth of an urban economy.
c. Using the Seattle Outlook Precis posted on NYU Classes, profile the economic bases of Seattle and briefly describe the city’s prospects for future growth using the most relevant economic terms learned.

d. Explain the statement, “An urban economy dependent on any particular set of export industries is likely to face an episodic economic future.”
e. Explain why globalization leads to further urbanization.

3) LAND USE AND THE IMPACT OF LOCAL GOVERNMENTS

(a) Define externality. Provide one example in relation to real estate markets.

(b) Define (1) fiscal zoning and (2) fiscal capitalization.

(c) Explain why the property tax is often described as the most important own-source revenue of local governments.

(d) What is the long-run economic incidence of an increase of the property tax? Explain.

4) ECONOMICS OF HIGHEST AND BEST USE

(a) Define Highest and Best Use.

(b) Explain the statement: “Cities are Value Propositions, not Cost Propositions.”1-866-275-3266
help@economy.com

ANALYSIS

VITALITYRELATIVE COSTS
LIVING BUSINESS RELATIVE OF LIFE

Best=1, Worst=378Best=1, Worst=403

STRENGTHS & WEAKNESSES

U.S.=100%

SHORT TERM

FORECAST RISKS

LONG TERM

RISK EXPOSURE
2019-2024

BUSINESS CYCLE STATUS

MOODY’S RATING

ECONOMIC DRIVERS

Highest=1
Lowest=403

EMPLOYMENT GROWTH RANK

Best=1, Worst=410

2018-2020 2018-2023
QUALITY

MOODY’S ANALYTICS / Précis® U.S. Metro / November 2019

MANUFAC

TURING

HIGH TECH

LOGISTICS

2013 2014 2015 2016 2017 2018 INDICATORS 2019 2020 2021 2022 2023 2024
232.6 243.9 252.6 261.8 277.9 298.3 Gross metro product (C12$ bil) 312.9 321.2 329.6 342.2 352.1 362.6
3.6 4.9 3.5 3.7 6.1 7.4 % change 4.9 2.6 2.6 3.8 2.9 3.0
1,502.3 1,543.6 1,592.8 1,644.2 1,685.5 1,725.1 Total employment (ths) 1,774.9 1,810.7 1,817.2 1,841.5 1,859.7 1,875.4
2.9 2.7 3.2 3.2 2.5 2.3 % change 2.9 2.0 0.4 1.3 1.0 0.8
5.3 4.6 4.1 3.7 3.6 3.4 Unemployment rate (%) 3.2 2.6 3.0 3.0 2.9 2.9
3.0 10.0 6.5 6.5 7.2 9.2 Personal income growth (%) 7.2 5.7 4.9 6.4 5.9 5.6
71.3 75.4 79.6 83.8 87.2 88.9 Median household income ($ ths) 90.7 94.2 96.9 100.4 104.1 107.7
2,791.8 2,843.1 2,896.6 2,954.3 3,007.3 3,048.1 Population (ths) 3,089.9 3,134.4 3,177.9 3,219.2 3,261.2 3,304.2
1.8 1.8 1.9 2.0 1.8 1.4 % change 1.4 1.4 1.4 1.3 1.3 1.3
31.0 34.0 36.5 40.2 35.2 24.1 Net migration (ths) 25.1 27.5 26.5 24.5 25.5 26.6
6,404 6,294 6,393 6,956 6,983 6,643 Single-family permits (#) 6,201 7,255 8,600 11,116 11,734 11,321
10,221 11,882 15,718 14,668 15,383 16,094 Multifamily permits (#) 15,545 14,234 14,402 17,801 18,699 18,772
212.0 231.9 253.5 284.5 323.5 359.0 FHFA house price (1995Q1=100) 366.9 375.4 388.8 405.4 427.8 457.7

Recent Performance. There is little that
can shake Seattle-Bellevue-Everett’s economy.
Despite troubles at top employer Boeing, the
metro division enters the 10th year of its expan-
sion with plenty of wind in its sails. Job and labor
force gains have accelerated over the past year,
and residential and commercial construction is
firming after a hiccup late last year. Steadfast
tech is the source of the economy’s vigor, and
robust hiring by mature firms and smaller com-
panies alike sustains a growing labor force. Hous-
ing affordability is a rare blemish on an otherwise
sterling economy; though house price apprecia-
tion is no longer outpacing incomes, two years of
double-digit gains have eroded potential buyers’
purchasing power.

Flight risk. Tough times at Boeing dampen
the near-term outlook for aerospace manufac-
turing, but the factory sector will find its foot-
ing next year as the firm resolves concerns over
the flightworthiness of its flagship 737 MAX.
The latest iteration of Boeing’s best-selling
jet was grounded in March following two fa-
tal crashes; subsequent tests by the Federal
Aviation Administration revealed additional
safety risks that prolonged its review. With in-
ventories of the popular plane stacking up, th1
1

TOPIC 1

ECONOMIC ANALYSIS AND REAL ESTATE INVESTMENT

ECONOMIC ANALYSIS: The analysis of markets and empirical economic data for the purpose of evaluating and estimating future economic activity.

Gross Domestic Product (GDP), is the summary statistic for the general health of an economy. Often referred to as income, GDP is more generally defined as the value of all goods and services produced by labor and property located in an economy.

GDP = C + I + G + (X-M)

where,

C=
consumption of goods and services

I =
private domestic investment

G=
government (consumption and investment)

X=
exports

M=
imports

Growth, changes in GDP and its components, is the focus of most economic analysis.

For the US national economy as of 1Q2017 (annualized trillion dollars, percent changes adjusted for inflation listed below, rounding errors adjusted to fit):

19.2= 13.3 + 3.2 + 3.3 + (2.3 – 2.9)

(1.8) (3.3) (3.6) (-0.3)
(nm)

Annualized growth rates in real dollars: dollar values corrected for gains or losses of purchasing power attributable to inflation:

A closely related measure of income is Gross National Product. GNP is the value of goods and services produced by an economy’s citizenry, regardless of their location, i.e. GDP adjusted for income from international locations.

The US is a net importer and the trade deficit has generally increased over the last 30 years.

Economic indicators are categorized as:

· Leading:
indicators that signal future changes in economic growth

· Coincident: indicators that reflect current changes in economic activity

· Lagging: indicators that reflect past changes in economic activity

Key Economic Indicators include:

Leading

Coincident

Lagging

Plant & equipment orders
Prices

Unemployment

NAPM

Industrial production

Inventory/Sales

DOW

Personal Income

Interest Rates

Consumer confidence

Consumer confidence
Consumer con.

Current Issues:

Monetary Normalization

Infrastructure Investment

Global ZIRP

Wage & Income Growth

WHAT IS MARKET ANALYSIS?

Real estate market analysis is the identification and study of demand and supply, usually for the purpose of real estate investment and development. Market analysis forms the basis for decisions regarding location and site, size, design and quality, features, and target use. Development projects should match locational demands of firms and households and satisfy those demands competitively. Market analysis continues through the development and eventual disposition of the project, particularly in unfamiliar or highly competitive markets. Real estate market analysis provides guidance for the many decision-makers, both private and public sector professionals involved in real estate development

A CRITICAL FLAW OF MANY MARKET ANALYSES IS PRESENTATION OF DATA WITHOUT ANALYSIS

· Qualitative analysis is becoming increasingly important, especial

  
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