FIN 3332- Market dynamics notes

FIN 3332- Market dynamics notes - 4l8113 Owner-Occupied...

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Unformatted text preview: 4l8113 Owner-Occupied Residential Real Estate Markets Chapter 13 - Basic supply/demand equilibrium model 7 Supply - amount orquantity ofthe good or service that will be offered at various prices — Demandmamountorquanfityufme good orservioe that will be desired at various prices — Equilibrium — the prica'qtanfity mmbination at whid'l quantity demanded equals quantity supplied Understanding Real Estate Market Dynamics Demonstrating Market Dynamics Pnce Movements In Real Estate Space Markets . Figures: Thedemand we‘ realestatemarkefiisdwnware — 13.1 Supply/Demand Equilibrium WW ‘5“ '" — 13.2 Demand Changes Price - Rae su write in rrfiost real efiahtgrgarkets isrvertlcgatl at - 13.3 Supply Changes Price hgh': Wang-“gag?” 0 Space an 0' [a or "5'19 — 13.4 Simultaneous Supply and Demand In a maflsfl “in 8 mflzmial supply GUM. We. Changes damndlnaeasesmflnotresufllnlong—tennpme increases Demand decreases. however. may lead to - Example from Fort Lauderdale, Florida dramatic once decreases GEE" Khaki I DEW” Ir: 5 L Commercial Real Estate Space Markets - Transactions for the rights to use land and burldings - People. firms and other entities are Willing to pay various pncesfortheuseafspaoeloroonsumpfionorproduetion purposes (demand) - Ownersofsoaaeare willingtoselithe nghtsto use such space to the users for various prices (supply) can Kauai-i in. 5 Office Space Markets necessary to charge top dollar 418/13 - Class C physically acceptable but not many Cb amenities - Class D few amenities and poor location Retail Space Markets Freestanding retail Neighborhood center Community center Regional center Superregional center Industrial Space Markets - Warehouse 0 Manufacturing/Production 0 Materials processing 0 Class A highest rent per square foot 2,0 ~35 in} 0 Class 8 very desirable but lack attributes l o/Fi 418/1 3 lkarbom Lodging Space Market Agricultural Space Markets - Highway motels - Convention/business hotels - Luxury hotels a Resort (destination) hotels - Extended stay hotels/motels - Annual (seasonal) cropland - Perennial cropland - Livestock grazing ONHKfimll-i: ID GN‘IWH: II Real Estate Asset Market ‘2 Residential Space Market . - Transactions involving cash-flow rights to real 1 l - Single—family detached homes - Single—family attached homes - Manufactured homes estate - See Figure 13.5 Major Types of Capital Asset Markets and Investment Products - See CloseUp “The Electronic Revolution’s Impact on the Value of l l l l - Multifamin apartnents I ,. l Location I | i ennui-Mn: i: I CZQ'I'LJl-Int t! i . 418l13 The Larger Market Price Determinants in the Real Estate Assets - The real estate asset market is part of a larger Market market; , 0 Opportunity of cost capital — Publidy traded equrty assets (stocks, mutual funds real _ estate invesmiem me) 0 Growth expectations — Privatety traded equrty assets (real property, private . Risk companies, 01! and gas partnerships) ‘ Publicty traded debt assets ( , ed securities. money instruments) top 11* — anatel'y traded debt assets (bank loans. whole mortgages, venture debt) .7 u Tying Together Space & Assets Markets Tying Together Space 8. Assets Markets, cont. - See Figure 13.6 The Real Estate System ' - Property ownersfinvestcrs in the asset market - Prevailing economic conditions influence both mine me Present V303 0W“? €35h flows (that (:2me and space markets ‘5- the Vaiue 0“ the property) . Landlords and tenants negotiate rents, which - If property vatuesare greater than or equal to cost produce cash flows to the real estate asset market 0‘ PmdUCUOU (Whigh 'ndUdeS reasonable mom for I the developer). developers build new space Ont'mm ta cmthmhc l’ 4/8/13 Dal thorn Commercial Real Estate Market Analysis Commercial Real Estate Market Analysis, cont. o Examination of the supply and demand sides of a = - Inputs to market analysis, cont, real estate space market and the balance 1 - Gum: gummmgdutes new ' r r supp wt coming in (equmbnum) hem“ them - Quantity of new construction mlaed — indicates new - Inputs to market analysis supply that is just arriving into the market . _ - - - o Absorption ofnewspaae—indiiztesme rate atwhidi Vacancy rate higher vacancy rate Indicates less new supp” is mg l in me mama demand reiafive to supply and vice versa - Rent or price level — trends in rents and prices indimte changes in the balanca between supply and demand Professional Market Anaiysis Reports Using Market Analysis to Look Forward - "Months Supply" ' Office - Mssuopty=wacarrtspaoe+spaoeinconstrucfionll - Lodging :63”:me t man _ u - Industrial - mon s suppty is much grea er construction me tornauprojeds.menmenewprojedwilllikelyhflme ' Apartments market at a time when supply exceeds demand o Owner—occupied residential - tfrnontns supptyisequaltoorlessttmconshuction fimefornewprojectsjtenanewpmjedwilllikelybe well—received try the market. ' Ll «055 in Lauoorfik ...
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