Real Estate Bubble

Introduction

There is a need for investors in real estate to comprehend when to purchase or vend their assets to avoid a market crash.  The understanding market cycle is a fundamental idea to succeed in real estate business (Macbeth, 2015). People used to purchase homes, give them to children as they waited for their value to increase. However, the value of housing has experienced a downfall of prices in the last year. Consequently, buying a house and expecting the value to rise has proved a great risk.

Generational Impact on Housing

The differences in size of age group, their migration pattern, their preference, their prospects of income affect the profile of forthcoming population profile and hence, housing marketing, structures cities, and prospects of a region. According to Skaburskis and Ontario, (2002), such differences vary the number of persons who form local housing market, the style of dwelling units to be constructed, required public services, neighborhood compositions as well as the expectations of builders, investors, and buyers. Such change affects the cohesiveness of neighborhood and resident well-being (Thomsett & Kahr, 2007). The changes also affect the labor force, income prospects for employees and variations in both native and regional economy. As a result, generational differences have a great impact on Real Estate (Skaburskis and Ontario, 2002).

Furthermore, environmental and housing stock, which was modified by old cohorts, affects the ability of new generation leaving their parents houses and finding suitable housing, purchase a home or move up the quality ladder of the housing. Equally said, welfare implication affects the number of persons leaving their parent’s housing. Skaburskis and Ontario, (2002) illustrate that first-timers in buying homes also affect options of household housing, their retirement plans, saving as well as equity. Prevailing housing markets links cohorts to the built environment legacy.  A variation of cohort trajectory and changing conditions surrounding cohorts affects the evolution of cities (Martin, 2011).

Government Functions in Real Estate

The function of Federal government in Real Estate is pervasive. The Federal Reserve can inhibit or encourage the development of Real Estates through regulating the supply of money as well as interest rates. Further, the executive, judiciary, and legislature alongside the Federal Reserve System may develop or enforce regulations, policies and rules that influence real estate business.  For instance, Irlander, (2008), demonstrates that the legislative move of passing the Fair Housing as well as the ant-discrimination laws, broad-based financial reforms, judicial enforcing federal laws and regulation of interest rates function in creating a climate that real estate professional must acknowledge.

Moreover, the functions of government in real estate’s transaction are comparable to the Federal government. The legislature passes statutes and the judiciary coupled with the executives enforces them. Administratively, different departments are established. The departments serve to oversee routines businesses of real estate professionals through offering personal assistance as well as education to the public (Martin, 2011). Additionally, the procedures as well as the scope of authority of transaction with the real estate rest with the state government. For example, according to Irlander, (2008), while applying for licenses as brokers, appraiser or real estate associate in Florida, the Florida Department Business and Professional Regulations and the Division of Real Estate according to chapter 475 of the Florida statutes influences such transactions. It is significant to point out that, the Florida Real Estate Commission is empowered in administering and enforcing laws pertaining real estate in the Florida Statutes (Irlander, 2008).  The commission also passes Florida Administrative Codes in conducting delegated responsibilities. As evident, the government plays a great role in real estate housing.

Furthermore, one must follow federal as well as statutes regulations in conducting real estate activities and apply for a permit from the local government to facilitate practicing the profession. The permits are called occupational licenses and act as proof of complying with federal laws as governed by the local municipalities (Martin, 2011). The local government calls for adhering to zoning regulations, constructions, safety codes, fire, engineering ordinances, insurance as well as planning for real estate.

Appraiser and the role in Real Estate

It is the role of an appraiser to identify property values, for instance, the value of the investment, insurable value, and potential investors’ value. Appraisers must comprehend associated data and the appraisal ethics within the real estate (Thomsett & Kahr, 2007). Appraisers assist in conducting researches as well as examinations to establish the value of the property. Moreover, they must have practical experience and technical education in real estate. They can concentrate in various areas of real estate, for instance, commercial and residential. Concentration may also extend to specific areas, for example, hotels, and restaurants. Appraisers play a significant role of valuation in real estate.

Career as a Real Estate Agent

Real estate agent offers different services according to the property they are appointed to purchase or sell on the owners’ behalf. The agents consider the desires of the owner in marketing the property. After choosing to dispose of property, they begin by a market campaign to attract various potential buyers (Thomsett & Kahr, 2007). Further, the agents act as a link between the buyers and sellers and help them in negotiations to facilitate arriving at an agreed selling price. It is crucial to point out that, the agent has market information on prevailing prices of various properties. Agents also engage in property letting on behalf on the owners. In this regard, the market and arrange for tenants to view the property (Martin, 2011). Real estate agents act as a link between the tenants and the owners while negotiating an agreement of tenancy or rent.

Auction theory in Real Estate

Auction theory in real estate provides significant insights on the competition of rational bidders. An instance of such insight is that actions performance and bids formation rely on the features of services as well as the tenure inspiration (Thomsett & Kahr, 2007). Moreover, auction theory facilitates the understanding of the formation of prices, posted prices and negotiations where buyers, as well as sellers, participate in establishing prices. The auction is closely related to the competitive market. As a result, auction pricing can assist buyers in comprehending oligopoly pricing by offering justification why housing in different regions cost higher than in other areas.

Conclusion

In sum, understanding housing market forces before investing in real estate is important.  Changes in generation affect s the distribution and pricing of housing. The government plays a crucial role in regulating the supply of real estate by controlling interest rates and the supply of money. Appraisers assist in the valuation of property to get a true reflection of fair market values. A Real Estate agent, on the other hand, links the buyer and the seller of the property. They also facilitate negotiation of lease owing to their knowledge of prevailing market forces.

 


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