Question 1

In constructing a market-defining "story," it is helpful to answer a series of fundamental questions around which analysis can be built. Which of the following questions is designed to identify the target market?
A) What is the real estate product under consideration?
B) Who are the customers?
C) What aspects of the product do the customers care about?
D) Who are the competitors?

Accepted Answer

This question is specifically designed to identify who the customers or target market are. The other questions in the list are focused on the product, customer preferences, and competitors, but not specifically on the target market.

Question 2

Survey research has been applied to real estate markets at many levels. Despite its frequent application, analysts must be cautious with survey use because:
A) it is difficult to implement
B) interviews and questionnaires are not received well by consumers
C) it cannot be used in a small sample area
D) it can be fraught with abortive errors

Accepted Answer

Survey research can be affected by several types of errors, including accidental or intentional mistakes made by respondents, errors in question wording or survey design, and nonresponse or selection bias. As a result, analysts need to be cautious when interpreting survey results and take steps to minimize these errors.

Question 3

A planned unit development (PUD) is a residential development that differs from traditional residential subdivisions in all of the following ways EXCEPT:
A) It encompasses a blend of detached single family, attached single family, townhouses and apartments.
B) It typically has larger individual lots with extensive side-yards on the property.
C) It typically includes a variety of common areas
D) It typically includes a variety of recreational facilities.

Accepted Answer

A PUD typically has smaller individual lots with minimal side-yards in order to accommodate a mix of housing types and common areas. Therefore, the statement "It typically has larger individual lots with extensive side-yards on the property" is false.

Question 4

A new residential development will face competition from other new developments, other builders, and sales of existing homes. To determine if demand in that market segment will be sufficient to justify proceeding with the project, a developer would be most interested in estimating a:
A) capture rate
B) capitalization rate
C) risk-free rate
D) risk premium

Accepted Answer

A capture rate estimates the percentage of potential buyers in a given market segment that are expected to purchase a particular development's units. This information helps the developer determine the potential demand for their project and decide whether or not to proceed with it. Capitalization rate, risk-free rate, and risk premium are not directly related to estimating demand for a new residential development.

Question 5

A popular adage in real estate is that property value is all about "location, location, location." However, for most property types in nonresidential realms, nonlocational requirements are equally or even more important. All of the following are examples of nonlocational factors EXCEPT:
A) Floor plate size
B) Amount of parking
C) Nature of current tenants
D) Proximity to modes of public transportation

Accepted Answer

The other options listed (floor plate size, amount of parking, nature of current tenants) are all examples of nonlocational factors that can impact the value and desirability of a property. Proximity to modes of public transportation is actually a locational factor, as it relates to the accessibility and convenience of the property's location.

Question 6

In the initial round of market analysis, analysts will attempt to provide key numbers that characterize the current condition and trend in the market. For rental retail space, the key market parameters in question would most likely include all of the following EXCEPT:
A) Projected occupancy growth
B) Projected rental rate growth
C) Current vacancy levels
D) Projected sales rates

Accepted Answer

Projected sales rates are not relevant to the analysis of rental retail space. The other parameters listed (projected occupancy growth, projected rental rate growth, and current vacancy levels) are all important indicators of the market conditions and trends for this type of real estate.

Question 7

Professor James Graaskamp often asserted that when one buys real estate, what one is buying is a set of assumptions about the future. Therefore, it is not surprising that the beginning point of the market research process is to:
A) collect relevant data to examine the market and test initial definitions
B) evaluate the results of market analysis
C) construct a market-defining "story"
D) refine market definitions and collect additional data

Accepted Answer

Constructing a market-defining "story" involves outlining assumptions about the future of the real estate market, which aligns with Professor James Graaskamp's assertion that buying real estate is essentially buying a set of assumptions about the future. This step is crucial as it sets the foundation for further research and analysis.

Question 8

Computer software systems that enable one to manipulate and "map" information with great flexibility and speed are referred to as:
A) geographical information systems (GIS)
B) psychographics
C) survey research
D) census mapping

Accepted Answer

Geographical information systems (GIS) are specifically designed software systems that allow users to manipulate and map information with great flexibility and speed. They are commonly used for analyzing and visualizing geographic data, such as maps and satellite images. Psychographics, survey research, and census mapping do not necessarily involve the use of specialized software systems for data analysis and mapping.

Question 9

In contrast to conventional market analysis, the "story" approach to market research starts with an analysis of:
A) conditions in global real estate markets
B) conditions in national real estate markets
C) conditions in state real estate markets
D) conditions in the property specific market

Accepted Answer

The "story" approach to market research focuses on the specific property market and its conditions rather than broader regional or national markets. It aims to understand the unique narrative of the property, including its history, location, and potential, to guide investment decisions.

Question 10

In the Palm Grove Office Complex example, the project was destined to be an ill-fated venture from its inception for all of the following reasons EXCEPT:
A) The zoning laws of University City ultimately prevented the project's developers from starting the construction process
B) University City was not well-suited for large office space geared toward firms with greater than 25 employees
C) Palm Grove Office Complex lacked the visual exposure, convenient access, and parking that its competitors held significant comparative advantages in.
D) The structures were primarily designed as general-purpose office space, which excluded potential occupants such as laboratories or medical offices.

Accepted Answer

The passage states that the zoning laws prevented the developers from starting construction, but it does not indicate that this alone made the project ill-fated. The other reasons (B, C, and D) all suggest that the project was not well-suited for the market and lacked key competitive advantages, making it unlikely to succeed even if it had been able to be constructed.

Question 11

The presence of real estate cycles presents a major challenge when forecasting real estate market parameters. If the market value of a residential developer's project exceeds its construction costs, an increase in the supply of units will occur. As the market becomes oversupplied, we would expect which of the following to occur?
A) an increase in occupancy levels
B) an increase in market values
C) a decrease in real rental rates
D) a decrease in construction costs

Accepted Answer

As the market becomes oversupplied, there will be a decrease in demand for rental units, which will lead to an excess supply of units. In order to attract tenants, landlords will have to lower their rental rates, leading to a decrease in real rental rates. An increase in occupancy levels or market values is unlikely to occur in an oversupplied market. A decrease in construction costs is also unlikely to occur unless there is a significant drop in demand for new construction projects.

Question 12

The most common definition of a city used for government data collection and reporting, identified as a single labor market area centered around a city with a population of at least 50,000 people, is referred to as a:
A) township
B) central business district
C) metropolitan statistical area
D) county

Accepted Answer

The definition given in the question matches with the criteria for identifying a metropolitan statistical area (MSA), which is a designated region centered around an urban center with a population of at least 50,000 people. MSAs are used by government agencies to collect and report data related to population, demographics, and labor market statistics. Therefore, the correct answer is C) metropolitan statistical area.

Question 13

In the Elysian Forest example, the planned unit development was destined to be an unsuccessful venture from its inception because:
A) There was a comparable project in the community that was successful.
B) The site and location of the project was atypical of the area as there were significant disadvantages in terms of location and visual appeal.
C) The target market was a nontraditional segment that relied heavily on a small portion of the local University City population.
D) University City was a big, high density city that could not support such development.

Accepted Answer

The answer of In the Elysian Forest example, the planned...

Question 14

A tool used by real estate analysts to relate a consumer's activities, interests, opinions, and values to a consumer's demographics is referred to as:
A) geographical information systems (GIS)
B) psychographics
C) survey research
D) census mapping

Accepted Answer

Psychographics is a tool used by real estate analysts to relate a consumer's activities, interests, opinions, and values to a consumer's demographics. Geographic information systems (GIS) and census mapping focus more on geographic and demographic data, while survey research is a method of collecting data rather than a tool for analyzing it. Therefore, option B is the correct answer.

Question 15

Real estate market research is an important process used by analysts to facilitate a better understanding of a property's future profit potential. All of the following statements regarding market research are true EXCEPT:
A) Real estate market research should always be flexible since the research depends directly on the problem at hand.
B) Market research consists of a series of facts that fails to consider the role of investor behavior in the decision-making process.
C) Most important data for a given market study often is not publicly available.
D) Market research should focus specifically on market segments for the property involved, rather than on the aggregate real estate market.

Accepted Answer

Market research takes into account various factors including the behavior of investors, so statement B is not true. The other statements are true.

Question 16

Since most data for a given market study is not readily available, analysts must be creative in their use of data that they are able to obtain. The primary source for detailed household demographic information is:
A) the U.S. Bureau of the Census
B) the Federal Reserve
C) the local tax collector's office
D) Not available publicly

Accepted Answer

The U.S. Bureau of the Census is the primary source for detailed household demographic information, including information on population, age, gender, education, income, and housing. This information is collected through surveys and other methods and is made publicly available for use by analysts and researchers. The Federal Reserve does not collect demographic information, and the local tax collector's office is unlikely to have relevant data for market studies.

Question 17

In collecting data for nonresidential property analysis, it is helpful to understand the business community that currently exists in the specific area in question. A preliminary approach for ascertaining the number of firms by size, industry, and location is to obtain data from:
A) the Bureau of Labor Statistics
B) the National Transportation Service
C) the U.S. Bureau of the Census: County Business Patterns
D) the Federal Reserve

Accepted Answer

The U.S. Bureau of the Census: County Business Patterns is the best choice for obtaining data on the number of firms by size, industry, and location. The Bureau of Labor Statistics provides data on employment and wages for different industries, but not necessarily the number of firms. The National Transportation Service and the Federal Reserve are not directly related to collecting data on nonresidential properties.

Question 18

While predicting real estate cycles is difficult, a key indicator used to evaluate where a property is within the cycle is:
A) the level of household income
B) the form of land use
C) the size of the property
D) the number of building permits issued

Accepted Answer

The number of building permits issued is a leading indicator of the real estate cycle as it reflects the level of demand for new construction, which can indicate whether the market is expanding or contracting. High levels of building permits indicate a growing market while lower levels indicate a slowdown.

Question 19

Development of subdivisions, apartments, offices, or other commercial structures can have a lead time of two years or more. In general, the longer the construction lead time:
A) the lower the construction cost
B) the greater the supply of units
C) the lower the market value
D) the greater the amplitude of real estate cycles

Accepted Answer

The longer the construction lead time, the greater the amplitude of real estate cycles. This is because the real estate market can experience fluctuations and changes during the extended period of development, affecting the demand and supply of units and ultimately impacting the market value.

Question 20

Preferences of households can vary with time, prosperity, and context. The nuances in the preferences or needs of market subgroups are commonly referred to as:
A) market segmentation
B) market parameters
C) market projection
D) market cycles

Accepted Answer

Market segmentation refers to the practice of dividing a market into subgroups based on certain characteristics or preferences. This allows marketers to tailor their strategies to better meet the needs and preferences of each subgroup. As households' preferences and needs can vary with time, prosperity, and context, understanding market segmentation is crucial for designing effective marketing campaigns. Market parameters, market projection, and market cycles are all related concepts, but they do not specifically refer to the nuances in the preferences or needs of market subgroups.

Quiz 6: Forecasting Value: Market Research

In constructing a market-defining "story," it is helpful to answer a series of fundamental questions around which analysis can be built. Which of the following questions is designed to identify the target market?

Survey research has been applied to real estate markets at many levels. Despite its frequent application, analysts must be cautious with survey use because:

A planned unit development (PUD) is a residential development that differs from traditional residential subdivisions in all of the following ways EXCEPT:

A new residential development will face competition from other new developments, other builders, and sales of existing homes. To determine if demand in that market segment will be sufficient to justify proceeding with the project, a developer would be most interested in estimating a:

A popular adage in real estate is that property value is all about "location, location, location." However, for most property types in nonresidential realms, nonlocational requirements are equally or even more important. All of the following are examples of nonlocational factors EXCEPT:

In the initial round of market analysis, analysts will attempt to provide key numbers that characterize the current condition and trend in the market. For rental retail space, the key market parameters in question would most likely include all of the following EXCEPT:

Professor James Graaskamp often asserted that when one buys real estate, what one is buying is a set of assumptions about the future. Therefore, it is not surprising that the beginning point of the market research process is to:

Computer software systems that enable one to manipulate and "map" information with great flexibility and speed are referred to as:

In contrast to conventional market analysis, the "story" approach to market research starts with an analysis of:

In the Palm Grove Office Complex example, the project was destined to be an ill-fated venture from its inception for all of the following reasons EXCEPT:

The most common definition of a city used for government data collection and reporting, identified as a single labor market area centered around a city with a population of at least 50,000 people, is referred to as a:

In the Elysian Forest example, the planned unit development was destined to be an unsuccessful venture from its inception because:

A tool used by real estate analysts to relate a consumer's activities, interests, opinions, and values to a consumer's demographics is referred to as:

Real estate market research is an important process used by analysts to facilitate a better understanding of a property's future profit potential. All of the following statements regarding market research are true EXCEPT:

Since most data for a given market study is not readily available, analysts must be creative in their use of data that they are able to obtain. The primary source for detailed household demographic information is:

In collecting data for nonresidential property analysis, it is helpful to understand the business community that currently exists in the specific area in question. A preliminary approach for ascertaining the number of firms by size, industry, and location is to obtain data from:

While predicting real estate cycles is difficult, a key indicator used to evaluate where a property is within the cycle is:

Development of subdivisions, apartments, offices, or other commercial structures can have a lead time of two years or more. In general, the longer the construction lead time:

Preferences of households can vary with time, prosperity, and context. The nuances in the preferences or needs of market subgroups are commonly referred to as: