Market Analysis & Valuation Flashcards

In apartment market analysis, 'net absorption' measures:

Answer: The change in the number of occupied units over a specified time period

Net absorption = occupied units at end of period minus occupied units at start of period, reflecting true demand relative to supply.

A submarket has 8,000 total apartment units with 480 currently vacant. What is the vacancy rate?

Answer: 6.0%

480 ÷ 8,000 = 0.06, or a 6.0% vacancy rate.

A 'soft market' condition in apartment leasing is best characterized by:

Answer: Excess supply leading to elevated vacancy and widespread concessions

A soft market has more supply than demand, resulting in high vacancy rates and landlord-funded concessions to attract residents.

During which phase of the real estate market cycle is new construction activity typically at its highest level?

Answer: Hypersupply phase

Hypersupply occurs when new construction — started during expansion — delivers at a rate that exceeds demand, causing vacancy to rise.

'Loss-to-lease' in apartment valuation represents the difference between:

Answer: Current market rent and the actual rents collected on in-place leases

Loss-to-lease occurs when existing leases were signed at rates below current market rents, representing unrealized income potential.

Competing properties in a submarket are heavily advertising two months of free rent. This most likely signals:

Answer: A supply surplus or weakening demand requiring landlord incentives

Widespread, large concessions indicate landlords are competing for a limited pool of renters, reflecting supply exceeding demand.

Which leading indicator is most useful for predicting FUTURE apartment demand in a market?

Answer: Employment growth projections and household formation trends

Employment and household formation are leading economic indicators that drive renter demand before it appears in vacancy or rent data.