Real Estate: Absorption projection, demand, rental growth rate, market value

Hi! I would really appreciate it if anyone could give me their opinion on the 5 questions/evaluation of my answers. I'm not sure if they're correct and would really appreciate any advice!

  1. What does the addition of too much competitive new supply have upon vacancy rates?

It may cause vacancy rates to increase since there is much more supply than demand, which would cause vacancy.

  1. How will an increase in demand impact absorption projections?

Absorption rate = number of homes sold in time period / total number of available homes

If there is an increase in demand, the absorption rate should increase since homes may sell more quickly

  1. What do absorption projections tell us?

Absorption projections tell us about the demand/supply for homes in the area. For instance if the absorption projection is high, it indicates that there is a strong demand for houses in the area so homes are being sold quickly. This would help investors make decisions such as investing in a project in the area.

  1. What impact do changes in absorption have upon rental growth rate projections?

If the absorption projection is high, the rental growth rate projection may be lower since many people buying homes quickly in the area may lead to an increase in rental rates which could lead to a decrease in demand for rental homes. Thus, the rental growth rate would decrease.

  1. What impact do changes in rental rates have upon market values?

If the rental rate increases the market value should increase as well since market value also accounts for rental income

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Sep 9, 2021 - 12:18pm

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