REA Market Research & Analysis 2 — Questions and Answers
Question 1: Which metric best measures the pace at which available homes are selling in a given market?
- Capitalization rate
- Absorption rate (Correct answer)
- Loan-to-value ratio
- Gross rent multiplier
Correct answer: Absorption rate
Absorption rate measures how quickly available housing inventory is sold or leased within a specific time period.
Question 2: A real estate analyst notices that a neighborhood's median home price increased 15% while the number of transactions fell 30%. This most likely indicates:
- Buyer's market with excess supply
- Declining market with falling demand
- Strong seller's market with constrained inventory (Correct answer)
- Stable market with balanced conditions
Correct answer: Strong seller's market with constrained inventory
Rising prices alongside falling transaction volume typically signals limited supply giving sellers pricing power despite fewer deals closing.
Question 3: In real estate market research, a 'comp' or comparable sale is primarily used to:
- Calculate a property's net operating income
- Assess environmental contamination risk
- Determine a building's replacement cost
- Estimate the market value of a subject property (Correct answer)
Correct answer: Estimate the market value of a subject property
Comparable sales (comps) are recently sold similar properties used as benchmarks to estimate the market value of a subject property.
Question 4: Which type of market analysis focuses specifically on supply and demand for a particular property type within a defined geographic area?
- Portfolio analysis
- Segmented market analysis (Correct answer)
- Macro-economic analysis
- Sensitivity analysis
Correct answer: Segmented market analysis
Segmented market analysis narrows focus to a specific property type and submarket to assess localized supply and demand dynamics.
Question 5: When analyzing retail real estate, 'trade area delineation' refers to:
- Setting rental rate boundaries for lease negotiations
- Identifying zoning districts for commercial use
- Mapping competing retail centers within 5 miles
- Defining the geographic zone from which a retail site draws its customers (Correct answer)
Correct answer: Defining the geographic zone from which a retail site draws its customers
Trade area delineation identifies the geographic boundary from which a retail location realistically captures the majority of its customer base.
Question 6: An analyst is comparing two office markets. Market A has a 5% vacancy rate and Market B has an 18% vacancy rate. Which conclusion is best supported?
- Market B landlords hold more negotiating leverage
- Market A is overbuilt relative to demand
- Market B has higher demand and will outperform Market A
- Market A has tighter supply conditions and likely stronger rent growth (Correct answer)
Correct answer: Market A has tighter supply conditions and likely stronger rent growth
A low vacancy rate like 5% signals tight supply, giving landlords leverage and supporting rent growth, while 18% indicates excess supply.
Question 7: Which data source would be MOST useful for analyzing demographic trends affecting residential real estate demand in a specific census tract?
- Federal Reserve Beige Book
- FDIC bank failure reports
- U.S. Census Bureau American Community Survey (Correct answer)
- National Association of Realtors commercial outlook
Correct answer: U.S. Census Bureau American Community Survey
The American Community Survey provides detailed demographic, social, economic, and housing data at the census tract level.
REA Market Research & Analysis 2
Which metric best measures the pace at which available homes are selling in a given market?