Real Estate Supply and Demand Terminology

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Questions and Answers

What is the definition of demand?

  • The quantity of a product or service that individuals desire to purchase (correct)
  • The amount of buyers and tenants who wish to acquire property for sale or lease
  • The amount of a product or service currently available for sale
  • The measurement of property available for sale or lease

How does an increase in supply affect prices?

  • Prices fluctuate erratically
  • Prices tend to rise
  • Prices tend to decrease (correct)
  • Prices remain stable

What is the cycle of supply and demand?

  • High demand causes a decrease in supply
  • Unfulfilled demand leads to new supply construction which then contributes to market equilibrium (correct)
  • Market equilibrium results in excess demand
  • Oversupply leads to increased demand

In real estate, what does 'price' depend on?

<p>Interaction between supply and demand (B)</p> Signup and view all the answers

How does an increase in demand impact prices?

<p>Prices tend to rise (C)</p> Signup and view all the answers

What is oversupply in the context of supply and demand?

<p>It indicates more supply than there is demand (A)</p> Signup and view all the answers

How does unmet demand contribute to the cycle of supply and demand?

<p>It starts the cycle anew by absorbing existing supply (B)</p> Signup and view all the answers

What does 'supply' refer to in real estate?

<p>Measurement of property available for sale or lease (D)</p> Signup and view all the answers

What impacts the value of a property according to the text?

<p>Values of neighboring properties (B)</p> Signup and view all the answers

What does merging adjacent properties to generate an aggregate value surpassing individual values refer to?

<p>Assemblage (D)</p> Signup and view all the answers

What does splitting a single property into smaller units potentially lead to?

<p>Higher overall worth (D)</p> Signup and view all the answers

What do increases in building permits indicate according to the text?

<p>Rising prices and construction (D)</p> Signup and view all the answers

Which factor plays a vital role in determining market dynamics?

<p>Major employers' movements (A)</p> Signup and view all the answers

What do shifts in the economic base affect according to the text?

<p>Vacancy rates (B)</p> Signup and view all the answers

How are decreases in vacancy rates interpreted according to the text?

<p>Rising prices/rents (D)</p> Signup and view all the answers

What do increases in prices imply according to the text?

<p>An increase in demand or decrease in supply, or both (B)</p> Signup and view all the answers

What happens to prices in real estate when there is an increase in demand?

<p>Prices tend to rise (A)</p> Signup and view all the answers

How does oversupply affect the real estate market?

<p>Causes market imbalance (D)</p> Signup and view all the answers

What is the impact of unfulfilled demand in the real estate market?

<p>Additional supply creation (A)</p> Signup and view all the answers

In real estate, what does 'demand' refer to?

<p>Quantity of buyers and tenants wishing to acquire property (A)</p> Signup and view all the answers

What does the cycle of supply and demand lead to in the real estate market?

<p>Unmet demand (A)</p> Signup and view all the answers

How are prices determined in real estate according to the text?

<p>Through the interaction between supply and demand (D)</p> Signup and view all the answers

What results from the construction of additional supply in the real estate market?

<p>Market equilibrium (D)</p> Signup and view all the answers

What can an increase in building permits indicate?

<p>Rising vacancy rates and construction (C)</p> Signup and view all the answers

How does the availability of labor force impact real estate market dynamics?

<p>Influences market demand and supply balance (B)</p> Signup and view all the answers

What can shifts in the economic base affect in the real estate sector?

<p>Demand for real estate (E)</p> Signup and view all the answers

How can assemblage impact the value of properties?

<p>Generate a surplus value exceeding individual values (D)</p> Signup and view all the answers

What do increases in vacancy rates signify in the real estate market?

<p>Declining prices/rents and a buyer's/tenant's market (B)</p> Signup and view all the answers

What is the impact of government regulations on real estate development activities?

<p>Influence on supply-demand equilibrium (D)</p> Signup and view all the answers

What do decreases in prices imply in the real estate market?

<p>Decrease in demand or increase in supply, or both (C)</p> Signup and view all the answers

What is the significant effect of major employers moving into an area?

<p>Rising vacancy rates and declining prices/rents (C)</p> Signup and view all the answers

What happens to prices in the real estate market when there is an increase in demand?

<p>Prices tend to rise (B)</p> Signup and view all the answers

How does oversupply impact the real estate market?

<p>Construction stops until market equilibrium returns (B)</p> Signup and view all the answers

What is the most likely outcome of unmet demand in the real estate market?

<p>Starting the cycle anew (D)</p> Signup and view all the answers

How do increases in supply affect prices in the real estate market?

<p>Prices tend to decrease (A)</p> Signup and view all the answers

What is the result of unfulfilled demand in the real estate market?

<p>Additional supply is constructed (A)</p> Signup and view all the answers

How are increases in building permits interpreted in the real estate market?

<p>As an indicator of rising prices, decreasing vacancy, and increased construction activity (B)</p> Signup and view all the answers

What does the concept of 'progression and regression' in real estate suggest?

<p>The value of a property is influenced by the values of neighboring properties (D)</p> Signup and view all the answers

How can the availability of labor force influence real estate market dynamics?

<p>By affecting market equilibrium and demand-supply balance (C)</p> Signup and view all the answers

What is the impact of assemblage in real estate?

<p>It generates an aggregate value exceeding individual property values (B)</p> Signup and view all the answers

How do shifts in the economic base affect the real estate sector?

<p>By impacting demand for real estate due to changes in local industries or economies (B)</p> Signup and view all the answers

What does the term 'subdivision' refer to in real estate?

<p>Splitting a single property into smaller units to increase overall worth (A)</p> Signup and view all the answers

How do decreases in vacancy rates affect the real estate market?

<p>They signify a market favoring buyers/tenants and rising prices/rents (D)</p> Signup and view all the answers

How do increases in prices impact the real estate market according to the text?

<p>They imply an increase in demand or decrease in supply, or both (A)</p> Signup and view all the answers

What can an increase in demand for real estate potentially lead to?

<p>Rising property prices and limited supply options (B)</p> Signup and view all the answers

What is the impact of an increase in supply on prices in the real estate market?

<p>Prices tend to decrease (A)</p> Signup and view all the answers

In the real estate sector, what is determined by the interaction between supply and demand?

<p>Prices (B)</p> Signup and view all the answers

How does unmet demand affect the cycle of supply and demand in real estate?

<p>It starts the cycle anew (A)</p> Signup and view all the answers

What does an increase in demand lead to in terms of prices in the real estate market?

<p>Prices tend to rise (B)</p> Signup and view all the answers

When there is unfulfilled demand in real estate, what could it potentially lead to?

<p>Construction of additional supply (D)</p> Signup and view all the answers

What is the likely result of an oversupply situation in the real estate market?

<p>Ceasing of construction (A)</p> Signup and view all the answers

What happens when more supply is added to the real estate market?

<p>Oversupply may occur (B)</p> Signup and view all the answers

How does the cycle of supply and demand start anew in real estate?

<p>'For Sale' signs reappear (B)</p> Signup and view all the answers

What does the term 'plottage value' refer to in real estate?

<p>The surplus value generated by merging adjacent properties (C)</p> Signup and view all the answers

How do increasing building permits typically affect the real estate market according to the text?

<p>Point to a rise in vacancy, higher prices, and more construction (C)</p> Signup and view all the answers

What is one of the key factors influencing the equilibrium of supply and demand in real estate markets?

<p>Availability of labor force (A)</p> Signup and view all the answers

In real estate, what do decreases in prices often indicate?

<p>A decrease in demand or increase in supply (B)</p> Signup and view all the answers

What does the concept of 'assemblage' involve in real estate?

<p>Merging adjacent properties to generate surplus value (C)</p> Signup and view all the answers

How can major employers moving into an area influence the real estate market equilibrium?

<p>Significantly change the supply-demand balance (C)</p> Signup and view all the answers

What do increases in vacancy rates suggest about the real estate market conditions?

<p>Favor buyers/tenants with declining prices/rents (D)</p> Signup and view all the answers

'Subdivision' in real estate refers to which of the following actions?

<p>'Splitting a single property into smaller units (B)</p> Signup and view all the answers

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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

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