A fast-growing suburb shows unusually high profits for new apartment construction. Within a year, several developers start similar projects, and asking rents begin to level off. Which principle best explains the new market behavior?
Correct Answer
C) Competition from new market entrants
The principle of competition recognizes that substantial profits attract more market participants. As more developers enter, supply grows and the earlier high profit levels often moderate.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A transfer tax is a tax imposed on the transfer of ownership of real estate.
Reconciliation is the final step in the appraisal process where the appraiser analyzes the value indications from all applicable approaches and arrives at a single final opinion of value. It is not a simple average of the three values.
The comparable sales approach estimates a property's value by comparing it to similar properties that have recently sold in the same market area. It is the most widely used and reliable approach for appraising residential properties.
More Valuation Market Analysis Questions
The best method to determine fair market value is:
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When commercial office demand and supply decline equally:
The main real estate market participants include:
An appraiser is using the income approach to value a 12-unit rental building in Brooklyn. The building generates $180,000 in annual gross rental income. Operating expenses total $54,000 annually. The appraiser determines that a 7.5% capitalization rate is appropriate for this type of property in this location. What is the indicated value using the income approach?
- → A first-time buyer in New York City asks their agent about the difference between owning a co-op versus a condo. What is the fundamental ownership difference the agent should explain?
- → The cost approach is generally the least reliable of the three approaches for valuing a building constructed in the 1930s. The main reason is:
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Previous Question
Appraiser Jordan Lee is reviewing the basic elements that must generally be present for real property to have market value. Which of the following is NOT one of those elements?
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An appraiser notes that a once-stable neighborhood has gained a commuter rail stop, new employers, and a major streetscape upgrade over the last three years. Which principle reminds the appraiser that value is affected because real estate markets are constantly in flux?