Abstract

A real estate market is, in fact, a basic one of all other markets that are functioning in particular financial area. Under such circumstances, it is very important to develop this sector of the US economy and watch the development of this trend of business. This paper discusses such issues as the cost of real estate objects and factors that have influenced this cost up to the present period.

A real estate market is multidimensional issue. It means that the issue should be approached from the different sides. Let us try to take a look at the functioning of housing, as it is an important segment in the country’s internal market. For this objective I have chosen the article by John Barbanel “Why Some Senior Housing Sells”.  The author of the article describes the situation in the real estate market in the following words: “even in an economic downturn, high-end senior housing appears to be relatively immune to the vagaries of the market”.(Barbanel J., p.22) In this article the author mentions the fact that the value of housing closely depends on relative value (if to compare with other assets) of the other housings. In spite of the recession in the United States of America, the real estate market of the country demonstrates the presence of rather high prices for buyers. The article also states that the major part of buyers are ready to pay from $850,000 up to $2.5 million for building. The author explains the reason of such a situation in the following words: owners of luxury elder housing projects have a reserves what enables them to receive additional profits from real estate assets even despite of the present crisis in the economy. Besides, the article states that the owners of the other housings are posed to receive benefits from the units. This is largely so because this sector of the US economy is debt-free. The number of homes has reached 35%.

            If to take a look at the New York real estate market, one can notice a very interesting peculiarity. That peculiarity explains why real estate units are able to generate profits.

 Bradford Perkins, the co-founder and chairman of Perkins Eastman Architects in Manhattan, mentions the idea that long approval processes is able to raise prices of buildings as well as that of the labor. Bradford Perkins calls it “the Banana syndrome”. (Barbanel J., p.21)

            If to speak about interest rate for building loans, one should take into account the bilateral nature of this questing. The situation is largely reasoned by the crisis that is concerned with the US mortgage market. As for the interest rates, these are raised in order to boil the activities that are present in the above mentioned sector. The same situation repeats with the real estate market. Some parts of the buildings are very expensive what stimulates the growth of the interest rates. Under such circumstances, the government (and in particular the Federal Reserve) has to take into consideration that in case of the crisis, the real estate market requires from the state much flexibility as to the way in which interest rates policy must be conducted.

            If to speak about other aspects of the topic, in particular construction costs, one can note that this aspect is, in fact, very important while speaking about the production resources. These were described as very expensive. If to resume thinking about the same issue one has all chances to say that policy of regulation of the US real estate market and especially the factor of appraisement has its own specifics. This question is not easy to be answered and regulated because of the crisis in the country.

            In fact, a lot of economists state that this real estate sector of the US economy has got many challenges nowadays. “We are coming out in a challenging time,” said Wendy Maitland, a managing director of the ID Marketing Group at Brown Harris Stevens (Barbanel J., p.22) according to the article Big Deal (the author is Josh Barbanel). That is way it is time to change different approaches for appraisement of real estate units. But this article notes that the US economy “is up for the challenge” and that a lot of investors understood that the US real estate sector is a place for hopeful investments that would enable to multiply the capital of the company. For example, some of investors understand once mentioned that: “New York is a deep and strong market.” (If to speak about regional policies in the country). (Barbanel J., p.27) Besides, the article notes that in spite of the recession in the United States of America modern buildings (if to compare with the surrounding older postwar buildings in the neighborhood) are fashionable (in economical understanding) and accordingly to it construction what implies on the high spending.

            Of course this ambiguous situation (connecting with the next wave of recession) in the country and in the world as a whole must impact the real estate markets and construction costs and leave a lot of questions about how to manage this sector and succeed in this area. The question that arises is how to regulate interest rates and volumes of loans (or investments) for the market. It is clear that the smallest incorrect step is able to influence the whole industry in a very negative way.

            To conclude, the situation at the US real estate market can be described as rather challenging. There are many questions that remain to be unanswered. Many of these require urgent solution and adequate regulation. Also, there are a lot challenges that must be tackled. This is especially true when to speak about the market of real estate objects. Of course, appraisal have to be adequate to the issues that have been already stated in the request.

 

Bibliography:

BARBANEL JOSH, “Big Deal” New York Times. October 17, 2008. Retrieved from http://www.nytimes.com/2008/10/19/realestate/19deal2.html?_r=1&ref=realestate&oref=slogin

BRENNER, ELSA, “Why Some Senior Housing Sells”. New York Times. October 17, 2008.

 from http://www.nytimes.com/2008/10/19/realestate/19wczo.html?ref=realestate