Real Estate Market Cycles Flashcards

Which economic indicator is most closely watched as a leading indicator of real estate market expansion?

Answer: Housing starts data

Housing starts measure new residential construction and serve as a leading indicator of future supply and market health.

During the 'hypersupply' phase of a real estate cycle, what typically happens to vacancy rates?

Answer: Vacancy rates rise above the long-term average

Hypersupply occurs when new construction exceeds demand, causing vacancy rates to climb above historical norms.

A real estate investor who purchases properties during the recession phase of a market cycle is employing which strategy?

Answer: Contrarian investing

Buying during downturns when others are fearful is a contrarian strategy that aims to acquire assets below replacement cost.

Which of the following best describes 'absorption rate' in real estate?

Answer: The pace at which available properties are sold or leased in a market

Absorption rate measures how quickly available inventory is sold or leased, indicating supply-demand balance.

When the 10-year Treasury yield rises significantly, what is the typical short-term effect on cap rates?

Answer: Cap rates tend to expand upward

Rising Treasury yields increase borrowing costs and investor return expectations, pushing cap rates upward and property values down.

In Mueller's four-phase real estate cycle model, what phase follows 'recovery'?

Answer: Expansion

Mueller's model progresses from Recovery → Expansion → Hypersupply → Recession, then repeats.

A market with a months-of-supply figure below 3 months is generally characterized as:

Answer: A seller's market

Less than 3 months of supply indicates tight inventory favoring sellers, who can command higher prices.