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Chapter 4: Government Controls and Real Estate Markets
Chapter 7: Valuation Using the Sales Comparison and Cost Approach
Chapter 8: Valuation Using the Income Approach

Article

Riddel, M. (2011). Are housing bubbles contagious? A case study of Las Vegas and Los Angeles home prices. Land Economics, 87(1), 126-144. Retrieved from EBSCOhost database.

Multimedia

Wall Street Journal. (2011, October). California and the banks [Video file]. Retrieved from http://online.wsj.com/video/opinion-california-and-the-banks/24E3E2DA-EBA9-4BB1-95DA-ED2C09817BA9.html
Wall Street Journal. (2011, June). Markets hub: Bad mortgages weigh on banks [Video file]. Retrieved from http://online.wsj.com/video/markets-hub-bad-mortgages-weigh-on-banks/431F472C-8299-4789-94EB-1F113526C4C8.html

Recommended Readings

Seiler, M.J., Seiler, V. L., Harrison, D. M. and Luchtenberg, K. F. (2009). The role of profit, law and ethics in residential real estate investments. Journal of Real Estate Practice and Education, 12 (2), 157-171.
Brinkmann, J. (2009). Putting ethics on the agenda for real estate agents. Journal of Business Ethics, 88, 65-82.

Discussions
To participate in the following discussions, go to this week's Discussion link in the left navigation.

Property Tax

The property tax has been criticized as an unfair basis for financing public schools. Areas that have high property values are able to pay better schools than area having lower property values. Thus, there is an inequality of educational opportunities that tends to perpetuate educational and social disadvantages for those who live in low-income areas.

Do you agree or disagree?
How could school financing be modified to provide more equal funding among all regions of a state? Respond substantively to at least two of your classmates’ posts.

Zoning & Property Value Discussion

The main argument traditionally advanced in the favor of zoning is that it protects property values. Do you believe this contention? If so, how does zoning protect property values? If you do not believe the contention, why not? Respond substantively to at least two of your classmates’ posts.

Quiz
To complete the following quiz, go to this week's Quiz link in the left navigation.

Week Two Quiz

This quiz consists of 10 questions. The amount of time the quiz will take to complete will vary by individual.

Assignment
To complete the following assignment, go to this week's Assignment link in the left navigation.

Case Study

Read the case study: “Are Housing Bubbles Contagious? A Case Study of Las Vegas and Los Angeles Home Prices” and watch the supplemental videos:

California and the Banks
Markets Hub: Bad Mortgages Weigh on Banks

In a three- to four-page paper (not including the title and reference pages), develop an analysis that includes:

A summary of the case including the key players and background information.
A description of the scope of real estate bubbles. (Are housing bubbles contagious?)
An analysis of the real estate bubble issue and ethical considerations.
At least one recommendation on how the real estate industry, homebuyers, and other stakeholders can help in avoiding real estate bubbles. Real estate principles must be used as support.

You are encouraged to incorporate course material and additional readings (i.e., journal articles, books, etc.) into your analysis to strengthen the content of your paper.

Your paper must be formatted according to APA style as outlined in the Ashford Writing Center and include at least two scholarly sources in addition to the textbook.

1. Externalities can play an important role in determining a property's price, either by adding value through positive externalities or by diminishing value through negative externalities. Which of the following is most likely to be considered a negative externality? (Points : 1)

       Nearby parks and recreation facilities
       Quality neighborhood schools
       Public assistance facilities such as homeless shelters.
       Well-kept landscapes.

Question 2. 2. Which of the following would be categorized as a cause of external obsolescence? (Points : 1)

       Lack of adequate insulation
       Deterioration of indoor carpets
       Increased traffic flow due to more intensive use in the local area
       Outdated fixtures

Question 3. 3. Which of the following measures is considered the fundamental determinate of market value for income-producing properties? (Points : 1)

       Net operating income
       Potential gross income
       Operating expenses
       Capital expenditures

Question 4. 4. The process of converting periodic income into a value estimate is referred to as income capitalization. Income capitalization models can generally be categorized as either direct capitalization models or discounted cash flow models. Which of the following statements best describes the direct capitalization method? (Points : 1)

       Value estimates are based on a multiple of expected first year net operating income.
       Appraisers must make explicit forecasts of the property's net operating income for each year of the expected holding period.
       Appraisers must select the appropriate yield at which to discount future cash flows.
       The forecast must include the net income produced by a sale of the property at the end of the expected holding period.

Question 5. 5. Most appraisers would say that report writing is one of the most important functions that they perform. Assume that an appraiser is putting together a report for a single family home. Which of the following reporting options would be the most commonly used in this scenario? (Points : 1)

       Self-contained appraisal report
       Summary appraisal report
       Restricted appraisal report
       Oral appraisal report

Question 6. 6. It was not until the late 1960's that land use controls moved to the forefront of public interest, as the belief that the environment was an endless and costless resource was replaced with the notion that the world was a closed system with limited space, air, water, and other resources. Environmentalists coined which of the following terms to refer to this new point of view? (Points : 1)

       Smart growth
       The Silent Spring
       Spaceship earth
       Urban sprawl

Question 7. 7. Net operating income is similar to which of the following measures of cash flow in corporate finance? (Points : 1)

       Dividend yield
       Earnings before deductions for interest, depreciation, income taxes, and amortization (EBIDTA)
       Price-earnings ratio
       Discount rate

Question 8. 8. Accrued depreciation is the difference between the current market value of a building and the total cost to reproduce it new. One reason for this difference is related to changes in tastes, preferences, technical innovations, or market standards. This is commonly referred to as: (Points : 1)

       physical deterioration
       functional obsolescence
       external obsolescence
       tax depreciation

Question 9. 9. The cost approach to valuation assumes the market value of a new building is similar to the cost of constructing it today. Which of the following terms refers to the expenditure required to construct a building of equal utility using modern construction techniques, materials, and design that eliminates outdated aspects of the structure? (Points : 1)

       Reproduction cost
       Replacement cost
       Fixed cost
       Variable cost

Question 10. 10. One complication that appraisers may face is the variety of lease types that may be available for a particular property type. Which of the following statements best describes a "graduated" or step-up lease? (Points : 1)

       The monthly rent remains fixed over the entire lease term.
       The lease establishes schedule of rental rate increases over the term of the lease.
       Rental rate increases are indexed to the general rate of inflation.
       Rental rates are a function of the sales of the tenant's business.