Deck 6: Forecasting Value: Market Research

Question 1

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.

Answer 1

C

Question 2

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

Answer 2

D

Question 3

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.

Answer 3

A

Question 4

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.

Question 5

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.

Question 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

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?

Question 14

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

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

A developer of a new townhome community has gathered the following market information for University City.The developer estimates that there will be 1,200 home (all types)sales in University City over the next year.An analysis of demographic information has revealed that the core market share for the townhome project within the community is 10%.Assuming a capture rate of 20%,what is the developer's first year projection of townhome sales in the new community?

A)24 units
B)120 units
C)240 units
D)600 units

Question 22

Suppose a developer is interested in building a new apartment community.Through her market research,the developer has determined that the target market segment potential in year 1 consists of 100 households.The developer believes that the target market segment potential will grow by 5% annually over the next five years.If the developer projects a capture rate of 25% for each of the next five years,how many units does she plan on selling by the end of year 5?

A)25 units
B)125 units
C)138 units
D)175 units

Question 23

Suppose a developer is interested in building a new residential subdivision.Through his market research,the developer has determined that the target market segment potential in year 1 consists of 160 households.If the developer projects that he will be able to sell 24 homes in the first year,what is his assumed capture rate?

A)6.67%
B)15%
C)24%
D)85%

Question 24

Suppose a developer is interested in building a new townhome community.Through his market research,the developer has determined that the target market makes up 10% (core market share)of the households that currently reside in the metropolitan area.If an analysis of data from the MLS indicates that there should be approximately 500 residential sales in this area over the next year,what is the projected number of units the developer could expect to sell in year 1 if he is able to capture 50% of the market potential?

A)500 units
B)250 units
C)50 units
D)25 units

Question 25

Suppose that you have begun to gather some demographic data in order to project the potential sales of a new development project.The developer hopes to be able to target the following household types who fall in the upper 10% of income brackets: Empty Nesters,Single Parents,and Unrelated Individuals.Utilizing the following population information,determine the core market share that the development project yearns to target with this project.Total Owner Occupant Households: 48,000;Traditional Families in the Upper 10% of Income Brackets: 25,000;Empty Nesters in the Upper 10% of Income Brackets: 5,000;Single Parents in the Upper 10% of Income Brackets: 10,000;Unrelated Individuals in the Upper 10% of Income Brackets: 8,000

A)4.17%
B)47.92%
C)52.08%
D)92.00%

Question 26

A developer of a new planned unit development (PUD)has gathered the following market information for University City.The developer estimates that there will be 1,500 home (all types)sales in University City over the next year.If an analysis of demographic information has revealed that the core market share for the PUD project within the community is 14.0%,what is the total market segment potential for this project?

A)42 units
B)105 units
C)210 units
D)1290 units

Question 27

Suppose a developer is interested in building a new apartment community.Through her market research,the developer has determined that the target market segment potential in year 1 consists of 100 households.The developer believes that the target market segment potential will grow by 5% annually over the next five years.If the developer projects a capture rate of 25% for each of the next five years,but is only to sell 26 apartment units in each of the next five years,in which year will her actual sales first fail to meet her projected sales numbers?

A)Year 2
B)Year 3
C)Year 4
D)Year 5

Question 28

Suppose that you were interested in building a luxury apartment complex in your hometown.In your analysis of local demographics,you discover that the target market makes up only 5% (core market share)of the households that currently rent (or would be interested in renting)in this town.If market experts believe that a total of 5,000 apartment units will be rented in your entire hometown within the next year,what is the projected number of units the developer could expect to lease in year 1 if he is able to capture 20% of the market potential?

A)1000 units
B)500 units
C)250 units
D)50 units