Discovering Demand
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Transcript of Discovering Demand
Discovering Real Estate Demand
For your next project
Discovering Real Estate Demand
• D. Scott Smith, CCIM
Professor of Real Estate
• Fair Housing, Steering, Blockbusting
It’s a NO NO!
• No magic bullet theory
Discovering Real Estate Demand
“What you need to do to make money, is to focus on where is the demand”
http://video.cnbc.com/gallery/?video=3000072098 2:17
Discovering Real Estate Demand
“RETHINK” Real Estate
( first know the established model )
Discovering Real Estate Demand Traditional Demand Model
• Economic Sectors
Basic + Non Basic Employment
• Economic Base Multiplier
Total Employment / Basic Employment
Discovering Real Estate Demand Traditional Demand Model
• Location QuotientTotal Industry Local / Total Local Employ _________________________
Nation Industry Total / National Total Employ
• Standard Industrial Classification System
• Shift Share Projections
Discovering Real Estate Demand
• Absorption
The rate at which supply is reduced over a given time period
Answers the “how” of demand
Discovering Real Estate Demand
• Demand Matrix
• Demand Triggers
Answers the “why” of Demand
Discovering Demand D2 = Hassle Free
Emotion Reusable Best overall
Affordability Location Demographics Indicators Psychographics
D2={ H x E x R }
{ B x A x L }
{ D x I x P }
“Herbal Dip”
Discovering Real Estate Demand
Demand Matrix
• Demographics Who will buy it?
• Psychographics
Will they like it? • Economic Indicators
Will they be able to afford it?
Discovering Real Estate Demand
Demand Trigger #1 - Demographics
Discovering Real Estate Demand
Demographics
•Age
•Sex
•Income
•Location
•Interests
Discovering Real Estate Demand
• Study of characteristics in an
identified market
• Hard facts and external realities
• Census and point of sale driven
Discovering Demand
Discovering Demand
Discovering Real Estate Demand
• What are the Demographics
of the Room?
Discovering Real Estate Demand
Demographics report can be found at
www.putrealestatetowork.com
•According to the room’s demographics, what type of real estate would have the most demand?
•How about in five years?
Discovering Real Estate Demand
Demand Trigger # 2 - Psychographs
Discovering Real Estate Demand
•If Demographics are the hard facts,
Psychographs are the sensory component
•Categorization about how you feel about something
•The key to understanding what motivates a customer
Discovering Real Estate Demand
How is information gathered?
Discovering Real Estate Demand
• Survey method
• Social Interactions
• Data Mining Companies
• Search Engines
Discovering Real Estate Demand
• Values, Attitudes, Lifestyles System
VALS http://www.strategicbusinessinsights.com/vals/free/2010-06-VALSbrochure.pdf
•Eight basic market segmentations
Discovering Real Estate Demand
Innovator
•Highest incomes, high self-esteem•Expression of taste•Consumer choices are "finer things”•Image importance
Discovering Real Estate Demand
Thinkers
•High-resource group and
idealistic•Mature, well-educated •World views, open to change•Practical consumers and rational decision makers
Discovering Real Estate Demand
Believers
•Conservative and predictable consumers •Favor American products and brands•Focused on family, community,
and religion •Modest incomes
Discovering Real Estate DemandAchievers
•Motivated by achievement and work-oriented
•satisfaction from jobs
and families
•Politically conservative
•Respect authority and status quo
•Favor established products and services that show off their success to their peers.
Discovering Real Estate DemandStrivers
•Low-resource group,
•Motivated by achievements
•Values very similar to achievers
•Have fewer economic and social, and resources.
•Style is extremely important
•Strive to emulate people they admire
Discovering Real Estate DemandExperiencers
•Median age of 25. •Energy, physical exercise, social activities•Avid consumers, spending on clothing, fast-foods, music, etc.•Emphasis on new
products and services
Discovering Real Estate Demand
Makers
•Practical people who
value self-sufficiency. •Focused on the familiar-family, work, and physical recreation•Have little interest in the broader world.•Appreciate practical and functional products
Discovering Real Estate Demand
Survivors
•lowest incomes. •few resources •median age of 61 •tend to be brand-loyal consumers
Discovering Real Estate Demand
•Use the VALS survey method to determine the Psychographic of the rooms leading demographics.
•Would the Demand analysis change from Demographic to Psychographical analysis?
Discovering Real Estate Demand
Demand Trigger # 3
Economic Indicators
Discovering Real Estate Demand
Why Economic Indicators?
•Used as a forecast for local and national economies.
•Demonstrate when an economy expands and contracts.
Discovering Real Estate Demand
Indicators for Spending, Manufacturing, Housing, Inflation, Productivity, and Employment
Discovering Real Estate Demand
Different Indicators will be
used for:
• Office, Retail, Housing, Industrial• Buyer vs. Tenant• Business and Personal Financing
Discovering Real Estate Demand
Several “BIGGIE” Indicators
• EmploymentReleased on 1st Friday each monthMeasures job growth
• Consumer Confidencelast Tuesday of the monthMeasures how consumers feel about economy, etc.
Discovering Real Estate Demand
Several “BIGGIE” Indicators
• Gross Domestic ProductQuarterly w/ revisions
Measures how fast or slow and economy is growing
• Consumer Price IndexMonthly following
Measures inflation in retail goods and services
Discovering Real Estate Demand
Economic Indicators as it relates to Real Estate
•Housing StartsMonthly
Measures new homes and permits for future homes.
•Existing Home SalesMonthly
Measures monthly sales of prev. home sales
Discovering Real Estate
Demand•New Home SalesMonthly
Measures Sales of New Homes
•Weekly Mortgage ApplicationsMonthly
Measures number of applications to purchase/refi homes
Discovering Real Estate Demand
Trickle Down Economics
•Each local economy has similar data to each area.
•Determines Local, National, and International Economic conditions and where they are heading with reasonable accuracy.
Discovering Real Estate Demand
Economic Indicators can be found at http://www.census.gov/cgi-bin/briefroom/BriefRm
A complete calendar can be found here: http://www.census.gov/epcd/econ/www/indicator_calendar_date.htm
Discovering Real Estate Demand
Economics and Statistics Administration http://
www.esa.doc.gov/
Bureau of Labor and Statistics
http://www.bls.gov/bls/newsrels.htm
Discovering Real Estate Demand
Demand Matrix Results
Conclusion
Discovering Real Estate Demand
Putting it together
Discovering Real Estate DemandPutting it together
Discovering Real Estate DemandPutting it together
Discovering Real Estate Demand•Age 35-50
•Male•Income-•Location- Texas ( major MSA) •Psychograph- Achievers / Thinkers•Industry- Higher Education•Works in a Office•Housing Type
Where is there a gap and demand?
Discovering Real Estate Demand
•Give each Trigger a value from 1-10 and find the average for each location
Location #1
H- 7 D- 4
E- 6 I- 8
R- 5 P- 5
B- 9
A- 7
L- 7 = 6.44
Discovering Real Estate Demand
For your next project
Thank you!