REAL ESTATE ECONOMICS AND VALUE PowerPoint Presentation, PPT - DocSlides

REAL ESTATE ECONOMICS AND VALUE PowerPoint Presentation, PPT - DocSlides

2016-08-03 33K 33 0 0

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Chapter . 5. CHAPTER TERMS AND CONCEPTS. Agents of production. Amenities. Demand. Demography. Economic forces. Fiscal policy. Gross domestic product (GDP). Monetary policy. Monetary . theory. Over-improvement. ID: 430819

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Presentations text content in REAL ESTATE ECONOMICS AND VALUE

Slide1

REAL ESTATE ECONOMICS AND VALUE

Chapter

5

Slide2

CHAPTER TERMS AND CONCEPTS

Agents of productionAmenitiesDemandDemographyEconomic forcesFiscal policyGross domestic product (GDP)Monetary policyMonetary theory

Over-improvementPhysical forcesPolitical forcesPrinciple of anticipationPrinciple of changePrinciple of competitionPrinciple of conformityPrinciple of increasing anddecreasing returns

2

Slide3

CHAPTER TERMS AND CONCEPTS

Principle of progression andprinciple of regressionPrinciple of substitutionPrinciple of supply and demandPrinciples of highest and best use and consistent usePrinciples of surplus productivity, balance, and contribution

Purchasing powerReal estate cycleScarcitySecondary marketSocial forcesSupplySurplus of productivityTransferabilityUtility

3

Slide4

LEARNING OUTCOMES

List the four basic elements of value.List and give examples of the broad forces that affect value.Define real estate cycles.Name the major supply and demand factors that cause economic changes affecting real estate.Describe the federal government’s role in the economy.Explain how the principles of value relate to the marketing and productivity of real estate.

4

Slide5

THE REAL ESTATE VALUE INFLUENCES

Real Estate has no Intrinsic ValueValue is Derived from Rights and Benefits that Come from:OwnershipPossession andUse

5

Slide6

FOUR ESSENTIALS OF VALUE

UtilityUsefulness; the ability to create a desire for possessionScarcityIn relatively short supply; a lack of abundanceDemandThe desire to possess plus the ability to buy; effective purchasing powerTransferabilityThe ability to change the owner or use; marketable title

6

= Market Value

Slide7

BROAD FORCES INFLUENCING VALUE

Physical ForcesSocial ForcesEconomic ForcesPolitical Forces

7

Slide8

PHYSICAL FORCES

Natural ResourcesDeveloped Resources

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Slide9

SOCIAL FORCES

DemographicsNeighborhood StabilityPopulationLife StylesAttitudes; BehaviorAttitudes; DevelopmentAttitudes; Public Education

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Slide10

ECONOMIC FORCES

Income Levels

EmploymentWages and JobsMoney and CreditPrice LevelsPersonal SavingsGeneral Business ActivitySupply and Demand for HousingProduction of Goods and Services

10

Slide11

POLITICAL FORCES

Zoning and Land UseBuilding and SafetyEnvironmental LawsEndangered Species ActPolice, Fire, and HealthCrime PreventionPublic WorksFiscal PolicyMonetary PolicyGovernment Sponsored ProgramsGovernment Regulations

11

Slide12

HOW ECONOMIC TRENDS AFFECT REAL ESTATE

Economic Trends and the Business CycleReal Estate Supply FactorsReal Estate Demand FactorsFederal Government Activity

12

Slide13

ECONOMIC TRENDS AND THE BUSINESS CYCLE

An Economic Trend is a Pattern of ChangesCyclesBusiness cyclesReal Estate CyclesThe Cycle of ConstructionNew Home SalesVolume of Sales

13

Used by Permission of Alma Dizon:

www.riverside-real-estate.us

Slide14

REAL ESTATE SUPPLY FACTORS

Housing SupplyNew ConstructionSupply of Vacant Land

14

Slide15

REAL ESTATE DEMAND FACTORS

PopulationPurchasing Power

15

Slide16

FEDERAL GOVERNMENT ACTIVITY

Housing and Urban Development ProgramsFNMAFederal National Mortgage AssociationSecondary MarketFHAFederal Housing Administration

16

Figure 5.5:

Government

Housing Project

under

Construction

Slide17

FEDERAL GOVERNMENT PROGRAMS

Energy and the EnvironmentEPAEnvironmental Protection AgencyFEMAFlood MapsGovernmental Banking and Monetary PolicyFederal ReserveMonetary Policy Actions

17

Slide18

THE ECONOMIC PRINCIPLES OF VALUATION

Principle of SubstitutionPrinciple of ConformityPrinciple of ProgressionPrinciple of regressionPrinciple of ChangePrinciple of Supply and DemandPrinciple of Competition

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Slide19

PRINCIPLE OF SUBSTITUTION

When a Property Easily can be Replaced by Another, the Value of Such a Property Tends to be Set by the Cost of Acquiring an Equally Desirable SubstituteThe Principle of Substitution is a Basic Concept Behind Each of the Three Approaches to Value

19

Slide20

PRINCIPLE OF CONFORMITY

Maximum ValueProperties are similarSizeStyleQualityAmenities/UtilityOver-improvement5 bedroom in a 3 bedroom neighborhood

20

Slide21

PRINCIPLES OF REGRESSION & PROGRESSION

ProgressionLower value properties benefit from being close to high value propertiesRegressionHigher value properties tend to decrease in value when close to lower value properties.Is This an Illustration of Progression or Regression?

21

Slide22

PRINCIPLE OF CHANGE

Change is EternalPhysicalSocialEconomicPolitical conditionsNeighborhood ChangeDevelopment (growth)StabilityDeclineRenaissance (rebirth)

22

Slide23

PRINCIPLE OF SUPPLY AND DEMAND

Price Goes Up with an Increase in Demand or Decrease in SupplyPrice Goes Down with a Decrease in Demand or Increase in SupplyTheoretically, when Supply and Demand are in Balance, Market Prices Reflect the Cost of Production with Reasonable Profit

23

P

r

ice

Quantity

Demand

Supply

Slide24

Principle of Competition

Market Demand Generates ProfitsProfits Generate CompetitionExcess Profits Usually Generate Ruinous Competition

24

Slide25

PRINCIPLES OF REAL ESTATE PRODUCTIVITY

Agents of ProductionPrinciples of:Surplus ProductivityBalanceContributionPrinciple of Increasing and Decreasing ReturnsPrinciple of Highest and Best UsePrinciple of Consistent UsePrinciple of Anticipation

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Slide26

AGENTS OF PRODUCTION

LaborCoordinationCapitolLand

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Slide27

PRINCIPLE OF SURPLUS PRODUCTIVITY

The Net Income or Other Benefits that Remain after the Cost of Labor, Coordination, and Capital have been satisfied have been described as the “Residual” Returns to Land.Surplus of ProductivityDollar Amount of Surplus becomes Basis of Land Value

27

Slide28

PRINCIPLE OF BALANCE

Proper Balance in the Agents of Production is Required if the Maximum Value is to Result from the Costs Invested.Consistent with Principle of Conformity

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Slide29

PRINCIPLE OF CONTRIBUTION

The Benefit of An Agent of Production Depends Not on Cost But How Much it Contributes to ValueA pool may cost $25,000 but only contribute $10,000 of value.Principle of Surplus Productivity is the basis for the Principle of increasing and decreasing returns and the principle of highest and best use.

29

Slide30

INCREASING & DECREASING RETURNS

Fertilizer Principle!Added increments of fertilizer and labor do not result in equal increases in crop yieldThis principle helps property owners make decisions about adding improvements or remodelingWhat to add and to what degree

30

Slide31

PRINCIPLE OF HIGHEST AND BEST USE

Highest and Best Use Means the Most Profitable UseTheoretical Balance Between Land and ImprovementsHelps in estimating land valueHighest and Best Use as:VacantImproved

31

Slide32

PRINCIPLE OF CONSISTENT USE

Corollary to the Principle of Highest and Best UseMust appraise land and improvements on the basis of the same use. This photo shows that the improvements (house) are a detriment to development of town homes.

32

Slide33

PRINCIPLE OF ANTICIPATION

Value is the Present Worth of Future BenefitsThe Principle of Anticipation Underlies the Income Approach to Value.

33

Slide34

SUMMARY

34

Real

estate is a basic and fundamental form of wealth, it

has no intrinsic value. Its market value is a measure of the

rights that

the owners control, valued at prices set in the market. But

in order

to enter the market, the rights must have the four

elements of

utility, scarcity, demand

, and

transferability

.

We know that real estate is affected by changing business conditions

, such

as employment, income and price levels,

production volumes

, and

building construction

costs. Thus, it is possible

to analyze

and better understand real estate by observing key supply

and demand factors in the general economy.


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