Chapter 7
Market Analysis

Economic conditions analysis

Goals of economic conditions analysis

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

u   To identify the trends of such forces

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

Forces May Be Operational at:

u   international

u   national

u   statewide

u   regional

u   community

u   neighborhood

u   microneighborhood

u   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

u   Base employment

u   Non-basic or service employment

F   Location Quotient =
%Employment in Industryi Locally
%Employment in Industryi Nationally

Population Projections

F   Population = f(current population, births, deaths, migration)

F   Cohort Survivor modeling

F   Breaks down population into functional age cohorts and sex cohorts

F  0-2

F  3-14

F  15-17

F  18-40

F  41-55

F  56-65

F  66+

F   Use spreadsheet to model

Cohort Survival Model Equations

F   PopMale0-2year2=

F  PopMale0-2year1

F  + MaleBirthsyear1

F  - PopMale0-

F  2year1*DeathRateMale0-2

F  - (PopMale0-2year1 3)

 

Governmental, Legal, and Political analysis

u  Extra-national

u Treaties (NV treaties)

u FIRPTA

u  National

u Land use controls

u Income taxation laws

Governmental, Legal, and Political Analysis (Cont.)

u  State

u Land use control laws

u Tax demands and forms (Growth in Delaware)

u  Local

u Land use controls

u Permitting time

u Tax competition

Neighborhood analysis

u   Neighborhoods life cycle

u  Neighborhoods are developed (born) and grow.

u  Neighborhood experiences stability and maturity.

u  Neighborhood then begins a period of decline.

u  Values drop sufficiently to encourage redevelopment

u   Desirability may be determined by relative marketing times

u   Locational economic relationship determined (linkage)

Neighborhood Analysis: Demand supply relationship for the property

u   Price ranges

u   Typical financing available

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

u   Vacancy rates

u   Turnover in occupancy and/or ownership

u   Occupancy profile.

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

Microneighborhood factors

u   Condition of adjacent properties

u   Remora effect

u  Out parcels

u  Magnet stores

u  Adjacent transportation access points

u  Mass transit

u  Rail/truck/air for industrial

Types of market studies

u   General market study

u   Site-specific studies

u  Appraisal Market Analysis

u  Highest and Best Use Studies

u  Marketability Studies

Adjustment Studies

u   Market conditions study (successive sales)

u   Location (paired sales)

u   Financing (cash equivalency)

u   Tax Burden

u   Physical features