1 Chapter 26
CHAPTER 26: Real Estate and the Economy
I. Define how an Economic Base is important to
a community
A. Effect on Property Values
B. Vulnerability
C. Employment Multiplier
II. Explain the Short-Run Demand for Housing
A. Increase in Demand
B. Increase in Supply
C. Decrease in Demand
D. Effect of Inflation
III. Explain the Long-Run Demand for Housing
and Buying Pattern over an individual’s life
IV. Explain the effect of Age Distribution
A. Housing demand
B. More homeowners in a given market
C. People over 65
D. Another wave of new homeowners
V. Explain how Governmental Impact affects the
economy
A. Tax Laws (1986 Tax Bill)
B. Lending Regulations
VI. Fiscal Policy
VII. Monetary Policy
VIII. Secondary Mortgage Market
IX. Explain several types of Inflation
A. Define Cost-Push Inflation
B. Define Demand-Pull Inflation
C. Define Monetary Inflation
D. Define Real-Cost Inflation
X. Explain the economic cycle of the 1975-2000
Period
A. Low Real Interest
B. Tax Benefits
C. The Reversal of inflation and tax benefits
D. Looking Ahead
E. Reverting to the Owner-Occupant market
XI. Explain how Watching the Fed can affect your real
estate investment decisions, as well as the
monetary base
XII. Discuss the Outlook
A. Explain how “monetizing the debt” affects us
B. Discuss the parallel of an individual’s book
–
keeping problems, and the similarity to the
government’s problems
!
”#
#$
#
#
%
Chapter 26 2
Page Ref.
Soft Hard 26
back back Topic Teaching Tips
– 435 Opening Remarks Start this chapter by explaining the role the overall real estate
industry plays in the economy, i.e., shelter is one of man’s basic
needs along with food and clothing.
Absolutely every person is affected by the economy, and the
economy is affected by the real estate industry.
– 435 Economic Base Local Distinction: Identify the greatest economic base in your
area.
– 436 Vulnerability Stress: Single industry regions are vulnerable to change. Discuss
what has happened in your city or state, if appropriate.
– 436 Employment Summary: Relate the theory addressed under this heading to
Multiplier building a house, i.e., hundreds, perhaps thousands, of people are
responsible for manufacturing the numerous components that go
into building a house: surveyors, inspectors, loggers and lumber
mill workers, designers, engineers, and fabricators of refrigerators,
ranges, etc.
– 437 Increase in Demand Local Distinction: Address the supply versus demand versus
pricing of real estate in your area/state. Recite examples of
increases and decreases.
– 440 Long-Run Demand Local Distinction: Address the effect the “baby boom” had on
for Housing supply and demand and the eventual cost of housing.
– 441 Age Distribution Local Distinction: Address the aging baby boomers and their
effect on the style of housing construction. See the sub-topic
“Over 65” later in this chapter.
– 445 Secondary Mortgage Local Distinction: Review how the secondary mortgage market
Market has made available more “loanable” funds (see Chapter 14).
– 446 Types of Inflation Summary:
Cost-Push = Cost of raw materials, goods, and services raises the
price of the finished product.
Demand-Pull = Too much money chasing too few goods.
Monetary = Too much money created by government.
Real Cost = More effort necessary to produce the same quality
goods or services.
– 448 Looking Ahead Local Distinction: Survey your class for their prediction(s).
3 Chapter 26
&
‘
( )*+
% %
, -./ “, / #primary and
secondary
industries? 01
2(3
4
* “base industry
versus service industries? 0
####%
Chapter 26 is available only in hardback text, Real Estate Principles.
##%
!#
!,
##
#!,
!