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Unformatted text preview: ay last 2 to 9 years. Usually real estate cycles and business cycles do not exactly coincide. Generally, the real estate market decline precedes the decline in the business activity cycle. Conversely, the tendency of the business cycle is to recover prior to the real estate cycle. Figure 2-1: Business Cycle CAUSES OF THE BUSINESS CYCLE
Many variables change, amplify, or subdue the movement of the business cycle. They include: Internal influences – Some influences are directly economic in nature, resulting from regulatory and market activities. Dynasty School (www.dynastySchool.com) 2-9 REAL ESTATE FINANCE
• • • • • Government policy – The government has extensive influence on: Monetary conditions – Interest rate and credit availability. Spending – Saving and investment vs. consumption. Taxes and government spending. Market psychology – The human element. Consumers and investors will often act according to how they feel, despite what is actually happening. Prices – When prices increase faster than income levels, inflation is amplified and consumption is reduced. • External influences – Conditions which arise outside economic circles also affect the business climate, both nationally and locally. • Weather – Abnormal weather conditions, like prolonged cold spells or drought, can affect agriculture, transportation, and industrial production as well as public psychology. Catastrophe – Earthquakes, floods, and fires present severe, unexpected strains on local resources, which may ripple throughout the economy. War – Causes increased military spending and affects allocation of industry and manpower. Population – Changes in the median age of the population affect consumption patterns. Migration into or out of a nation or locality is another powerful influence. • • • LOCAL FACTORS
Every locality has its own economy, whose strength and fluctuations will differ somewhat from the national business cycle because of distinctive local conditions.
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.
- Spring '10