Employment in basic industries matters to a local market because those jobs:
Correct Answer
C) Bring income into the area from outside it
Basic or export activity sells goods or services outside the local economy, bringing income from external customers. It can support additional local activity and real-estate demand. The definition does not require higher wages, the most floor area or immunity from national cycles.
Why This Is the Correct Answer
Option C is correct because basic industries sell goods or services to customers outside the local economy, bringing income into the area from outside it. That income can support additional local, non-basic activity and demand for real estate. This flow of outside money is what makes basic employment important to a local market.
Why the Other Options Are Wrong
Option A: Require the most commercial floor space
Option A is wrong because the defining feature of basic industries is not that they require the most commercial floor space. Some basic employers use little space, and space needs do not define basic activity.
Option B: Pay higher wages than service positions
Option B is wrong because basic jobs are not defined by paying higher wages than service positions. Wage levels vary widely, and some service jobs pay more than some basic jobs.
Option D: Are the least sensitive to national cycles
Option D is wrong because basic industries are not defined as the least sensitive to national cycles. Many export industries, such as manufacturing, can be quite sensitive to national and global economic swings.
Basic brings money in
Think of basic industries as the area's exports: they sell outside and bring dollars home. Those dollars then support local shops and services.
How to use: Use 'basic brings money in' to identify why export employment drives a local economy.
Exam Tip
When asked why basic employment matters, look for the option about bringing outside income into the area, not about wages, space or cycle sensitivity.
Common Mistakes to Avoid
- -Defining basic jobs by wage level
- -Assuming basic industries are immune to national cycles
- -Confusing basic employment with local service employment
Concept Deep Dive
Analysis
This question tests economic base analysis. Basic (export) employment sells goods or services outside the local economy and brings income into the area. That outside income supports additional local activity and real estate demand.
Background Knowledge
Economic base analysis divides local employment into basic (export) and non-basic (local service) activity. Basic employment brings outside income into the area, which then circulates and supports non-basic jobs, population and real estate demand.
Real-World Application
An appraiser analyzing housing demand in a town notes that a large manufacturer ships its products nationwide. The appraiser recognizes that this plant brings outside income into the town, supporting retail, services and housing demand, and watches its employment trends closely.
More Market Questions
In market area analysis, what characteristic distinguishes a district from a neighborhood?
Under USPAP Standards Rule 1-3(a), which item must an appraiser identify and analyze when necessary for credible results in a market value assignment?
How does the Fannie Mae Selling Guide define a neighborhood?
Several homes in a neighborhood are vacant and boarded up. Which market force does Fannie Mae classify this as?
Infrastructure investment such as a new interchange typically affects nearby land by:
A city raises property tax rates and tightens building regulations. Which market force does Fannie Mae classify these as?
An appraiser believes, without market evidence, that a nearby group home lowers values. What does Fannie Mae require?
Which three categories are used to report the supply of properties in a Fannie Mae neighborhood section?
An appraiser is asked for a retrospective value opinion as of three years ago. When must the appraiser meet the Competency Rule?
Can mixed land uses in a residential neighborhood ever enhance home values, according to Fannie Mae?
People Also Study
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Sales Comparison Approach
16.4% of exam
Cost Approach
13.6% of exam
Income Approach
8.2% of exam
Previous Question
An appraiser is completing the One-Unit Housing Trends portion of an appraisal report on a detached house for a loan to be sold to Fannie Mae. Interviews show that detached-house buyers and condominium buyers in the neighborhood do not compete. The neighborhood has 120 active listings, 30 of them condominiums. Over the past 12 months, 168 sales closed, 48 of them condominiums. What months of housing supply is indicated for the subject?
Next Question
A widow is granted an estate in a house for as long as she remains unmarried. What type of estate is this?