RAA Real Estate Market 4 — Questions and Answers
Question 1: A neighborhood where younger, wealthier residents are moving in and renovating older homes, displacing lower-income residents, is experiencing:
- Filtering down
- Urban sprawl
- Gentrification (Correct answer)
- Blight
Correct answer: Gentrification
Gentrification involves higher-income residents moving into lower-income neighborhoods, improving housing stock but often displacing existing residents.
Question 2: In real estate market analysis, the term 'months of supply' is calculated as:
- Active listings divided by monthly sales rate (Correct answer)
- Monthly sales rate divided by active listings
- New listings divided by expired listings
- Closed sales divided by pending sales
Correct answer: Active listings divided by monthly sales rate
Months of supply equals active listings divided by the average monthly sales rate, indicating how long it would take to sell all current inventory.
Question 3: The 'filtering' process in housing markets refers to:
- Screening potential tenants for credit worthiness
- Older housing moving down the quality/price spectrum over time (Correct answer)
- Removing distressed properties from comparable sales
- The process of zoning variances being reviewed
Correct answer: Older housing moving down the quality/price spectrum over time
Filtering describes how housing units move down the quality and price spectrum as they age, eventually becoming affordable to lower-income households.
Question 4: An appraiser studying long-term real estate market trends would find which data source MOST useful?
- Yesterday's MLS new listings
- A single year of sales data
- FHFA House Price Index spanning multiple decades (Correct answer)
- Current listing prices in a neighborhood
Correct answer: FHFA House Price Index spanning multiple decades
Long-term trend analysis requires multi-decade data sources such as the FHFA House Price Index, which tracks price changes over extended periods.
Question 5: Which principle explains why property values in a neighborhood tend to be influenced by surrounding properties?
- Principle of substitution
- Principle of conformity (Correct answer)
- Principle of contribution
- Principle of anticipation
Correct answer: Principle of conformity
The principle of conformity states that maximum value is achieved when properties are similar in size, style, and use to neighboring properties.
Question 6: A real estate market showing declining days-on-market and increasing list-to-sale price ratios indicates:
- A softening buyer's market
- A strong seller's market (Correct answer)
- Market equilibrium
- An oversupplied market
Correct answer: A strong seller's market
Declining days-on-market (properties sell faster) combined with rising list-to-sale ratios (buyers paying closer to or above list) indicate strong seller's market conditions.
Question 7: In market analysis, 'effective demand' differs from general demand because it requires:
- A desire for the property only
- Both the desire and the financial ability to purchase (Correct answer)
- Government approval for the transaction
- Multiple competing buyers
Correct answer: Both the desire and the financial ability to purchase
Effective demand combines the desire for a property with the purchasing power to actually buy it, distinguishing active market participants from those who merely want to buy.
RAA Real Estate Market 4
A neighborhood where younger, wealthier residents are moving in and renovating older homes, displacing lower-income residents, is experiencing: