In which phase of the real estate cycle do rising vacancies first meet a still-growing construction pipeline?
Correct Answer
D) Hypersupply, when starts outrun demand
Why this is correct: Hypersupply occurs when new construction starts, initiated during an expansion, continue to deliver units after demand growth has slowed. This results in rising vacancies despite ongoing delivery, a key phase leading into recession. Why the other choices are wrong: In recovery, absorption improves and vacancies fall. In expansion, rents climb and vacancies are low. In recession, values have typically already fallen. Exam tip: Hypersupply = new supply exceeds absorption, causing vacancy rise.
Why This Is the Correct Answer
Why this is correct: Hypersupply occurs when new construction starts, initiated during an expansion, continue to deliver units after demand growth has slowed. This results in rising vacancies despite ongoing delivery, a key phase leading into recession. Why the other choices are wrong: In recovery, absorption improves and vacancies fall. In expansion, rents climb and vacancies are low. In recession, values have typically already fallen. Exam tip: Hypersupply = new supply exceeds absorption, causing vacancy rise.
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