CRM Market Analysis & Trends 2 — Questions and Answers
Question 1: Which economic indicator is most directly used to forecast residential rental demand in a metropolitan area?
- Consumer Price Index (CPI)
- Employment growth rate (Correct answer)
- Federal funds rate
- Trade deficit figures
Correct answer: Employment growth rate
Employment growth drives population migration and household formation, directly increasing demand for residential rentals.
Question 2: A residential market where vacancy rates are below 5% is typically classified as:
- A buyer's market
- A balanced market
- A landlord's market (Correct answer)
- A distressed market
Correct answer: A landlord's market
Low vacancy rates (below 5%) indicate tight supply relative to demand, giving landlords pricing power — a landlord's market.
Question 3: When performing a Comparative Market Analysis (CMA) for a residential property, which adjustment is made for a comparable sale that lacks a garage the subject property has?
- Subtract the garage value from the subject's price
- Add the garage value to the comparable's sale price (Correct answer)
- Ignore the difference if it is under 10%
- Reduce the subject property's asking price
Correct answer: Add the garage value to the comparable's sale price
In a CMA, adjustments are made to the comparable sale — adding value for features the comparable lacks that the subject has.
Question 4: Which trend best describes the 'flight to quality' phenomenon observed in multifamily residential markets?
- Tenants moving from urban cores to suburban areas
- Renters upgrading to higher-amenity units as rents compress
- Institutional investors selling C-class assets to acquire A-class properties (Correct answer)
- Property managers raising standards to reduce maintenance costs
Correct answer: Institutional investors selling C-class assets to acquire A-class properties
Flight to quality refers to investors shifting capital from lower-grade assets to premium, higher-quality properties during market uncertainty.
Question 5: A residential manager notices that concessions such as one month free rent are increasing in the market. This most likely signals:
- Increasing rental demand outpacing supply
- A tightening labor market for property staff
- Oversupply or softening demand in the rental market (Correct answer)
- Rising mortgage rates reducing homeownership
Correct answer: Oversupply or softening demand in the rental market
Growing concessions indicate landlords competing for tenants, a sign of oversupply or weakening demand.
Question 6: In residential market analysis, 'absorption rate' refers to:
- The percentage of rent collected versus rent charged
- The rate at which available units are leased over a given period (Correct answer)
- The speed at which maintenance requests are resolved
- The ratio of operating expenses to gross income
Correct answer: The rate at which available units are leased over a given period
Absorption rate measures how quickly available rental units are leased, reflecting market demand strength.
Question 7: Which demographic trend has most significantly increased demand for smaller, urban rental units in the U.S. over the past decade?
- Aging baby boomers downsizing
- Millennials delaying homeownership and preferring urban living (Correct answer)
- Increased immigration from rural to suburban areas
- Corporate relocation of headquarters to secondary cities
Correct answer: Millennials delaying homeownership and preferring urban living
Millennials' preference for urban amenities and delayed homeownership has driven sustained demand for smaller urban rental units.
CRM Market Analysis & Trends 2
Which economic indicator is most directly used to forecast residential rental demand in a metropolitan area?