Chapter 7
Market Analysis

Economic conditions analysis

Goals of economic conditions analysis

*   To delineate the operational economic forces at work in the market-place

*   To identify the trends of such forces

*   To alert the client to possible shifts in such trends of such forces.

Forces may be operational at

*   international

*   national

*   statewide

*   regional

*   community

*   neighborhood

*   microneighborhood

*   The task of the appraiser is to identify only those factors which are operational or perceived by the marketplace as being operational on the subject property.

Economic base of a community

*   Base employment

*   Non-basic or service employment

*   Location quotients

Governmental, Legal, and Political analysis

*   Extra-national

*   Treaties (NV treaties)


*   National

*   Land use controls

*   Income taxation laws

*   State

*   Land use control laws

*   Tax demands and forms (Growth in Delaware)

*   Local

*   Land use controls

*   Permitting time

*   Tax competition

Social dynamics

*   Social composition in the area

*   Family formation patterns

*   Household size patterns

*   Crime

*   Technological change in transportation and work environments.

Neighborhood analysis

*   Neighborhoods life cycle

*   Neighborhoods are developed (born) and grow.

*   Neighborhood experiences stability and maturity.

*   Neighborhood then begins a period of decline.

*   Values drop sufficiently to encourage redevelopment

*   Desirability may be determined by relative marketing times

*   Locational economic relationship determined (linkage)

Neighborhood Analysis: Demand supply relationship for the property

*   Price ranges

*   Typical financing available

*   Average marketing times of properties in the neighborhood relative to that of the general community

*   Vacancy rates

*   Turnover in occupancy and/or ownership

*   Occupancy profile.

*   An analysis of these factors over a period of years can often identify neighborhoods in transition.

Microneighborhood factors

*   Condition of adjacent properties

*   Doctors, police personnel, and even politicians

*   High power electrical lines

Types of market studies

*   General market study

*   Site-specific studies

*   Appraisal Market Analysis

*   Highest and Best Use Studies

*   Marketability Studies

Adjustment Studies

*   Market conditions study (successive sales)

*   Location (paired sales)

*   Financing (cash equivalency)

*   Tax Burden

*   Physical features