61 Questions
What is the definition of demand?
The quantity of a product or service that individuals desire to purchase
How does an increase in supply affect prices?
Prices tend to decrease
What is the cycle of supply and demand?
Unfulfilled demand leads to new supply construction which then contributes to market equilibrium
In real estate, what does 'price' depend on?
Interaction between supply and demand
How does an increase in demand impact prices?
Prices tend to rise
What is oversupply in the context of supply and demand?
It indicates more supply than there is demand
How does unmet demand contribute to the cycle of supply and demand?
It starts the cycle anew by absorbing existing supply
What does 'supply' refer to in real estate?
Measurement of property available for sale or lease
What impacts the value of a property according to the text?
Values of neighboring properties
What does merging adjacent properties to generate an aggregate value surpassing individual values refer to?
Assemblage
What does splitting a single property into smaller units potentially lead to?
Higher overall worth
What do increases in building permits indicate according to the text?
Rising prices and construction
Which factor plays a vital role in determining market dynamics?
Major employers' movements
What do shifts in the economic base affect according to the text?
Vacancy rates
How are decreases in vacancy rates interpreted according to the text?
Rising prices/rents
What do increases in prices imply according to the text?
An increase in demand or decrease in supply, or both
What happens to prices in real estate when there is an increase in demand?
Prices tend to rise
How does oversupply affect the real estate market?
Causes market imbalance
What is the impact of unfulfilled demand in the real estate market?
Additional supply creation
In real estate, what does 'demand' refer to?
Quantity of buyers and tenants wishing to acquire property
What does the cycle of supply and demand lead to in the real estate market?
Unmet demand
How are prices determined in real estate according to the text?
Through the interaction between supply and demand
What results from the construction of additional supply in the real estate market?
Market equilibrium
What can an increase in building permits indicate?
Rising vacancy rates and construction
How does the availability of labor force impact real estate market dynamics?
Influences market demand and supply balance
What can shifts in the economic base affect in the real estate sector?
Demand for real estate
How can assemblage impact the value of properties?
Generate a surplus value exceeding individual values
What do increases in vacancy rates signify in the real estate market?
Declining prices/rents and a buyer's/tenant's market
What is the impact of government regulations on real estate development activities?
Influence on supply-demand equilibrium
What do decreases in prices imply in the real estate market?
Decrease in demand or increase in supply, or both
What is the significant effect of major employers moving into an area?
Rising vacancy rates and declining prices/rents
What happens to prices in the real estate market when there is an increase in demand?
Prices tend to rise
How does oversupply impact the real estate market?
Construction stops until market equilibrium returns
What is the most likely outcome of unmet demand in the real estate market?
Starting the cycle anew
How do increases in supply affect prices in the real estate market?
Prices tend to decrease
What is the result of unfulfilled demand in the real estate market?
Additional supply is constructed
How are increases in building permits interpreted in the real estate market?
As an indicator of rising prices, decreasing vacancy, and increased construction activity
What does the concept of 'progression and regression' in real estate suggest?
The value of a property is influenced by the values of neighboring properties
How can the availability of labor force influence real estate market dynamics?
By affecting market equilibrium and demand-supply balance
What is the impact of assemblage in real estate?
It generates an aggregate value exceeding individual property values
How do shifts in the economic base affect the real estate sector?
By impacting demand for real estate due to changes in local industries or economies
What does the term 'subdivision' refer to in real estate?
Splitting a single property into smaller units to increase overall worth
How do decreases in vacancy rates affect the real estate market?
They signify a market favoring buyers/tenants and rising prices/rents
How do increases in prices impact the real estate market according to the text?
They imply an increase in demand or decrease in supply, or both
What can an increase in demand for real estate potentially lead to?
Rising property prices and limited supply options
What is the impact of an increase in supply on prices in the real estate market?
Prices tend to decrease
In the real estate sector, what is determined by the interaction between supply and demand?
Prices
How does unmet demand affect the cycle of supply and demand in real estate?
It starts the cycle anew
What does an increase in demand lead to in terms of prices in the real estate market?
Prices tend to rise
When there is unfulfilled demand in real estate, what could it potentially lead to?
Construction of additional supply
What is the likely result of an oversupply situation in the real estate market?
Ceasing of construction
What happens when more supply is added to the real estate market?
Oversupply may occur
How does the cycle of supply and demand start anew in real estate?
'For Sale' signs reappear
What does the term 'plottage value' refer to in real estate?
The surplus value generated by merging adjacent properties
How do increasing building permits typically affect the real estate market according to the text?
Point to a rise in vacancy, higher prices, and more construction
What is one of the key factors influencing the equilibrium of supply and demand in real estate markets?
Availability of labor force
In real estate, what do decreases in prices often indicate?
A decrease in demand or increase in supply
What does the concept of 'assemblage' involve in real estate?
Merging adjacent properties to generate surplus value
How can major employers moving into an area influence the real estate market equilibrium?
Significantly change the supply-demand balance
What do increases in vacancy rates suggest about the real estate market conditions?
Favor buyers/tenants with declining prices/rents
'Subdivision' in real estate refers to which of the following actions?
'Splitting a single property into smaller units
Study Notes
Supply and Demand
- Supply refers to the amount of a product or service available for sale, lease, or trade
- Demand refers to the quantity of a product or service that individuals desire to purchase, lease, or trade at any given moment
Real Estate Definition and Measurement
- Supply: amount of property available for sale or lease, measured in dwelling units, square feet, or acres
- Demand: amount of buyers and tenants who wish to acquire property for sale or lease, measured in households, square feet, or acres
- Price is determined by the interaction between supply and demand
Effects of Supply and Demand on Price
- Increase in supply: prices tend to decrease
- Increase in demand: prices tend to rise
- Cycle of supply and demand: unfulfilled demand leads to construction of additional supply, resulting in market equilibrium, but can lead to oversupply, causing construction to cease until market equilibrium returns
Factors Affecting Supply and Demand of Real Estate
- Cost and availability of financing
- Accessibility of developable land
- Construction costs and their fluctuations
- Capacity of infrastructure to support growth
- Governmental regulations and police powers affecting real estate development activities
- Shifts in the economic base
- Major employers' movements into or out of an area
- Availability of labor force
- Land availability
Indicators of the Market
- Vacancy rates: increases signify a market that favors buyers/tenants and declining prices/rents, while decreases signify a market that favors sellers/landlords and rising prices/rents
- Building permits: increases indicate a decline in vacancy, along with increasing prices and construction
- Prices: increases imply an increase in demand or decrease in supply, or both, while decreases imply a decrease in demand or increase in supply, or both
Government Influence on the Real Estate Market
- Local oversight and approval of new development
- Local taxation jurisdiction
- Federal impact on interest rates
- Environmental laws and regulations
- Local zoning authority
Concept Explanations
Progression and Regression
- The value of a property is impacted by the values of neighboring properties
Assemblage
- Merging adjacent properties can generate an aggregate value that surpasses the individual values of each component, referred to as plottage value
Subdivision
- Splitting a single property into smaller units can potentially lead to a greater overall worth
Test your knowledge on real estate supply and demand terms such as supply, demand, and price. Learn about the measurement of supply and demand in the real estate market.
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