VenSim Simulation: Expanding the Real Estate Model Expanding the Real Estate Mod
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VenSim Simulation: Expanding the Real Estate Model
Expanding the Real Estate Model The causal diagram in Figure 17-15 includes only a few of the feedbacks discussed in section 17.4.3 and suggested by the interviews with real estate developers. Ex- pand the causal diagram to include these other feedbacks. In particular, consider CHALLENGE 1. 2. 3. The impact of market conditions on credit standards, lending practices, and the availability of financing for new projects. The impact of real estate market and construction activity on the pace of economic growth in the region. The effect of development activity on the availability and cost of architectural and construction firms and how the availability of these resources affects planning and construction times and costs. The effect of development booms and busts on tax rates, zoning and permitting regulations, and other factors that may affect the attractiveness of the region to developers and to business in general. Other feedbacks and effects you think might be important in understanding the full impact of real estate cycles on a community. 4. 5. For each new feedback process, assess its likely impact on the period, stability, and other characteristics of the marketExplanation / Answer
Business trend in US financing market has indeed demonstrated incredible growth and robust activity in recent years. According to a report by Mortgage Bankers Association over $500 billion in commercial real estate loans were initiated thus facilitating to elucidate strong financial scenery for lending.
Low interest rates, steady rental growth and rising property values does indeed facilitate to effectively increase investor activity in real estate business thus facilitating to effectively drive up demand for loans to finance these investments. Furthermore economic indicators such as GDP, employment, manufacturing activity, prices of goods etc. does indeed effectively facilitate to indicate the overall health of economy which eventually is also regarded as crucial element affecting the value of real estate business.
High fluctuations in raw material prices indeed can have a major impact on real estate business. Furthermore increasing costs of building materials including high cost of labor, land, steel prices etc. which indeed can be due to higher tariff rates and other prevailing economic factors eventually can pose a major challenge on nation's real estate sector.
Legislation is also another factor that can have a considerable impact on demand and prices of properties in real sector business. Tax credits, deductions and subsidies are some of the ways government can for the moment boost demand for real estate. Thus it’s important to be aware of existing government incentives which eventually can help you effectively determine changes in supply and demand and identify potentially forged trends.
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