real estate lecture 4

1. Lecture 4
Residential
Market Analysis

2. Types of Residential Units
1. Single-Family Detached
2. Single-Family Attached
3. Multifamily Housing
4. Manufactured Housing
5. Mobile Homes

3. Facts of
Residential Real Estate Markets
 Residential structures account for about 24% of the
value of all assets owned in the United States (value
approximately $6 Trillion)
 Neighborhood stability often presumed in areas where
a high proportion of housing units are owned
 Average square footage of homes in the U.S. has
increased nearly 25% in the last 50 years to
approximately 2,200 sf.
 Approximately 68% of Americans own their home. This
percentage has increased from 64% in 1993.

4. Long-Term Demand for Housing
Function of:
1. Number of households
2. Household growth rate
3. General economic productivity of income of the
typical household

5. Long-Term Demand for Housing
Year Population Average Household Size Households
1900 76,212,168 4.40 17,320,947
1950 151,325,798 3.47 43,554,000
2000 275,601,802 2.65 104,000,680

6. Long-Term Demand for Housing
 People living longer
 People having fewer children, decreasing
household size
 Divorce rate increase

7. Regional Demand for Housing
Three factors leading to absolute and relative growth in
the number of households:
1. Size of the existing population provides momentum to
the level of absolute population growth
2. Job growth correlates to the growth in the number of
households
3. Overall quality of life and cost of living in a region

8. Short-Term Demand for Housing
Two Dominant Factors:
1. Seasonality
2. Mortgage interest rates

9. Seasonality:
Residential Home Sales
Average
Monthly
Sales
Jan
Springtime housing sales
tend to run 40% higher
than in December
60%
80%
100%
120%
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

10. Short-Term Housing Demand:
Mortgage Interest Rates
 Rather than buying a cheaper house as rates
rise, many buyers choose to wait and hope
rates decrease
 When interest rates are decreasing, many
potential buyers wait in hopes that rates
continue to decrease, then will purchase
when rates increase in fear of continued rate
increases.

11. Lecture 4
Buying Versus
Renting

12. Renting Versus Buying:
Initial Misconceptions
 Not enough capital to purchase
 Overabundance of square footage
 Property maintenance and costs

13. Economic Factors Affecting the
Buy/Rent Decision
 Capital Constraints
 Expected Tenure
 Income Tax Rate
 Mortgage Rate Expectations

14. Economic Factors Affecting the
Buy/Rent Decision
 Investment Aspects of Homeownership
 Budgeting Risk
 Psychological Factors

15. Lecture 4
Government
Regulation and
Housing Demand

16. Federal Government Regulation
 Fair Housing Act
– Redlining
 Community Reinvestment Act
– FIRREA
 RESPA

17. Lecture 4
Senior Housing

18. Senior Housing
 By 2050, the 85 and older population will
have increased 300% from year 2000.
 1 in 5 Americans in year 2030 will be 65 or
older
 Senior segment of the economy outspends
young segment
 Senior income increased by Social Security
and Medicare, etc.

19. Senior Housing
Housing Desires of Seniors
1. To locate near friends, relatives, doctors,
hospitals
2. To locate in safe areas
3. To locate near shopping and entertainment
4. To have privacy, and options for socializing

20. Senior Housing
Housing Options for Seniors
1. Active adult community independent living facility
housing
2. Congregate housing with assistance
3. Congregate housing with assistance and nursing
4. Skilled nursing homes
5. Alzheimer’s specialized care centers
6. Hospice centers

21. Lecture 4
Future Housing
Trends

22. Future Housing Trends
 More workers required to travel, paired with
low interest rates, creates a demand for
second homes
 Decrease in brokerage costs from the internet
 Fast growing market segments: Seniors and
households with no children
 Permanent tenants evolving from changes in
upscale rental units