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Real Estate Economics: Introduction to Real Estate Economics- Chapter 1

Terms in this set (15)

Etymology of "Economy"
Greek: oikonomia

-oiko means house or household

-nemein means to manage
Steward
-generally, household members, in order to function properly and harmoniously, must make decisions effecting everything and everyone:

-The person who makes all of these decisions is steward

-thus, economy is synonymous with stewardship

-At the single-family scale, a steward is usually who? - both parents acting as one, deciding who gets what room, who does the chores, who prepares the food, so forth

-At the national level, whose responsibility of stewardship is it -Everyone's duty (accomplished through elected officials)

-"Society" includes both people and government of all levels: at the local level, every locality bears the responsibility of a stewardship. San Diego, we the citizens, city government
Economics
Social science that studies how societies use scarce resources to produce, distribute and consume goods and services

The application of scientific methods to study the human aspect of the world is a social science. Ex. sociology & psychology
Scarce resources
Refers to land
the activities involved.

Includes mining, logging, manufacturing, and use by consumers

Goods and services are the product of these activities
Real Estate
-Land, surface, subsurface, airspace

-Things affixed to land, buildings

-Appurtenances, rights

-See Real 101 for more details on the definition of real property
Real Estate Economics
Application of scientific methods to the study of human aspects of the world as they pertain to how society utilizes land to produce, distribute and consume goods and services.

General Economics:
Principles & Theory
+
Real Estate Principles & Practice
=
Real Estate Economics
Macroeconomics
Study of the national economy and its segments including national income, output, employment, and growth.
Microeconomics
Study of individual firms and households.
Real Estate Economics: a combined study
A study of people & how their actions affect property values.

-Study that uses economic principles
-Micro and macro analysis
-Analyzes trends
-Considers supply and demand
-Links general economic theory and real estate practice
Real Estate Economics is NOT:
-The study of general economics.

-The study of real estate practice.
Why study Real Estate Economics?
-Understand value fluctuations

-Estimate real estate values

-Solve problems

-Understand fluctuations & changes to local Real Estate markets
Scientific method
-supply and demand model
-imperfect market
-cost and benefit analysis
Study human behavior
-why so many people interested in this property

-why was it listed at that price

-what motivated the buyers to make the offers

-why did the seller accept this offer

-what incentives did the buyers have in such a dilapidated house
How society uses land
-remodeling fix-upper for profit, flip

-buying as investment rental and hold until price appreciation

-personal residence

-what else?
Produce goods & services
-rental

-home for sale once fixed up

-labor used in remodeling is service from the labor market
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