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1. Chapter 5Market Determinants of ValueThe material in this power point does not follow the text

   Real Estate FIN 331 Fall 2013
2. Basic attributes of real property Five Attributes of Real Estate (land) Unique in location—no two parcels are identical in terms of location. Unique in composition—no two parcels are identical in their geological composition. Durable—land is long-lasting. Finite in supply—no more land is being created (reductions in usable land). Useful—land has use or utility to people.
3. Four Major Forces Influencing Real Estate Values Social Trends: Trends in population growth and migration Family composition Aging of population More people working at home Amenities supporting leisure time (swimming pools, tennis courts, etc.) Security Consciousness (low crime rates, gated communities) Environmental awareness (Energy efficiency, water conservation, recycling)
4. Four Major Forces Influencing Real Estate Values Economic Forces Changes in income levels Availability of good jobs, stable employment opportunities Cost of construction Availability and cost of credit Cost of utilities; electric, gas
5. Four Major Forces Influencing Real Estate Values Physical / Environmental Forces Location, Location, Location! Access to public transportation, infrastructure Topography (rolling hills vs. flat treeless land) Weather (northern vs. southern vs. mid-west vs. southwest vs. Pacific)
6. Four Major Forces Influencing Real Estate Values Government State and Local employment taxes Monetary Policy (effects on interest rates and credit availability) Real Estate Taxes and Assessments Zoning restrictions Quality of schools Availability and quality of services: Police, Fire, Health Care
7. Basic Valuation Forces Supply of and Demand for Properties Supply and Demand tend to be fluid. Supply tends to follow upward price movements Demand trends downward when costs are high Fairness of Valuation tends to clear the markets (interest rates also a factor)
8. Impact of Risk on Valuation Ways to minimize market risk Avoid projects with high market risk Most hotels and motels Restaurants and entertainment facilities Properties in distressed areas Avoid projects with prospective major changes Lease rollover for major tenants Major renovations Study the macro market environment Are there changes in land usage? Is the area undergoing gentrification? Is industry moving into the area?
9. City vs. Country Cities grow vertically, suburbs grow horizontally Cities tend to have higher taxes: city wage taxes, additional sales tax, greater millage rates Some reasons for higher tax burdens: declining industrial activity Unionized municipal employees typically increases cost of municipal services Requirement to operate and maintain city owned transportation (buses, subways) Cities offer better access to convenience services; shops, restaurants, etc. easy walk distance. Cities offer greater variety of entertainment venues
10. Homework Assignment Key terms: Economic base (p. 102), Comparison activities (p 121) Study Questions: List some examples of economic forces. List some examples of social forces. List some examples of environmental forces. List some examples of governmental forces. List 5 major economic base activities in Wilmington, NC. Using the US Census Web-Site: What is the distribution of income for Wilmington/New Hanover County and North Carolina? Why are there differences in distribution? NC: http://quickfacts.census.gov/qfd/states/37000.html NHC: http://quickfacts.census.gov/qfd/states/37/37129.html Wilmington: http://quickfacts.census.gov/qfd/states/37/3774440.html