Real Estate Quiz – How Well Do You Know Your Industry?
In 2016, the S&P 500 recognized real estate as its own sector within the market for the very first time (formerly, it was classified underneath financial services) and it, like every other market sector, has its own ups and downs. Today, this newest sector of the economy accounts for less than 5% of the S&P 500 market conditions.
How well do you as an agent know your chosen industry? Here’s a short quiz to give you some insight into your knowledge. The concept and some, not all, specifics of this Real tate Quiz comes from the Wall Street Journal, 12/4/17.
1. How as an investor to participate in the real estate industry?
A. Mutual Funds and Exchange-traded funds (ETFs)
B. Stocks
C. As direct owners and/or landlords
D. All the above
Answer is D – all the above…you can buy investment properties for income or part of and IRA; you can buy stock in homebuilders or REITs; real estate can be part of large themed mutual funds.
2. What is a REIT?
A. Real estate investment trust
B. Real estate investment tax
C. Real estate investment tariff
D. Real estate investment trade
Answer is A – REITS are investment vehicles for portfolios of commercial properties from parking garages to cannabis farms to office buildings to hotels, etc.
3. True or False – Real estate is a countercyclical sector.
It depends – Yes, real estate usually rises during bull markets but even in bear markets, consumers need a place to live (they may rent instead of buy), they still pay to park, they still need storage facilities, etc.
4. Which subsector of the real estate industry is least prosperous now?
A. Multifamily housing
B. Industrial properties
C. Office properties
D. Retail
Answer is A – Retail ranks last in terms of both investment and development prospects according to PricewaterhouseCoopers )PwC) and the Urban Land Institute.
5. What were typical residential mortgage terms prior to the creation of the FHA and Fannie Mae in the 1930’s?
A. 3.5% down payment with a 30-year payoff
B. 20% down payment with a 20-year/30-year payoff
C. 50% down payment with a 10-year payoff
D. 0% down payment with interest only loans and a 30-year payoff
Answer is C – In the 1930’s, less than 49% of the population were home owners because less than half of the population people come up with a 50% down payment and a 10-year payoff period for a home. Today, the home ownership rate is at 63.9%. (Source data from the US Census Bureau)
6. How did the real estate sector contribute to the most recent financial crisis and subsequent recession?
A. Lenders relaxed standards and underwrote sketchy loans that wouldn’t fly today.
B. Banks (un)knowingly sold securities that contained unsold assets and ratings firms failed to accurate rate real estate debt sold to secondary markets.
C. Investors speculated on homeowners and housing.
D. All the above
Answer –D – All the above
7. What foreign country investors are buying the most US commercial real estate?
A. China
B. Canada
C. Germany
D. Japan
Answer – B – Canada – According to JLL and Research and Real Capital Analytics, Canada comes in buying 30%, China comes in buying 21%, Japan/Singapore comes in buying 15% and Germany comes in buying 7% of US commercial real estate.
8. What US city has the lowest rate of apartment vacancy?
A. New York
B. Seattle
C. San Francisco
D. Boston
Answer – A – New York – According to the National Real Estate Investor, New York has a 1.9% vacancy rate; Boston has a 2.6% vacancy rate; San Francisco has a 2.8% vacancy rate; Los Angeles has a 2.9% vacancy rate; Seattle has a 3% vacancy rate; DC has a 3.8% vacancy rate.
9. Which commercial real estate approach is not recommended in 2018?
A. New housing
B. Property price appreciation
C. “Experiential” retail
D. Senior housing
Answer – B – Property price appreciation – PwC and the Urban Land Institute advise investors to look at cash flow from income as a benefit source rather than property value appreciation.
1. How as an investor to participate in the real estate industry?
A. Mutual Funds and Exchange-traded funds (ETFs)
B. Stocks
C. As direct owners and/or landlords
D. All the above
Answer is D – all the above…you can buy investment properties for income or part of and IRA; you can buy stock in homebuilders or REITs; real estate can be part of large themed mutual funds.
2. What is a REIT?
A. Real estate investment trust
B. Real estate investment tax
C. Real estate investment tariff
D. Real estate investment trade
Answer is A – REITS are investment vehicles for portfolios of commercial properties from parking garages to cannabis farms to office buildings to hotels, etc.
3. True or False – Real estate is a countercyclical sector.
It depends – Yes, real estate usually rises during bull markets but even in bear markets, consumers need a place to live (they may rent instead of buy), they still pay to park, they still need storage facilities, etc.
4. Which subsector of the real estate industry is least prosperous now?
A. Multifamily housing
B. Industrial properties
C. Office properties
D. Retail
Answer is A – Retail ranks last in terms of both investment and development prospects according to PricewaterhouseCoopers )PwC) and the Urban Land Institute.
5. What were typical residential mortgage terms prior to the creation of the FHA and Fannie Mae in the 1930’s?
A. 3.5% down payment with a 30-year payoff
B. 20% down payment with a 20-year/30-year payoff
C. 50% down payment with a 10-year payoff
D. 0% down payment with interest only loans and a 30-year payoff
Answer is C – In the 1930’s, less than 49% of the population were home owners because less than half of the population people come up with a 50% down payment and a 10-year payoff period for a home. Today, the home ownership rate is at 63.9%. (Source data from the US Census Bureau)
6. How did the real estate sector contribute to the most recent financial crisis and subsequent recession?
A. Lenders relaxed standards and underwrote sketchy loans that wouldn’t fly today.
B. Banks (un)knowingly sold securities that contained unsold assets and ratings firms failed to accurate rate real estate debt sold to secondary markets.
C. Investors speculated on homeowners and housing.
D. All the above
Answer –D – All the above
7. What foreign country investors are buying the most US commercial real estate?
A. China
B. Canada
C. Germany
D. Japan
Answer – B – Canada – According to JLL and Research and Real Capital Analytics, Canada comes in buying 30%, China comes in buying 21%, Japan/Singapore comes in buying 15% and Germany comes in buying 7% of US commercial real estate.
8. What US city has the lowest rate of apartment vacancy?
A. New York
B. Seattle
C. San Francisco
D. Boston
Answer – A – New York – According to the National Real Estate Investor, New York has a 1.9% vacancy rate; Boston has a 2.6% vacancy rate; San Francisco has a 2.8% vacancy rate; Los Angeles has a 2.9% vacancy rate; Seattle has a 3% vacancy rate; DC has a 3.8% vacancy rate.
9. Which commercial real estate approach is not recommended in 2018?
A. New housing
B. Property price appreciation
C. “Experiential” retail
D. Senior housing
Answer – B – Property price appreciation – PwC and the Urban Land Institute advise investors to look at cash flow from income as a benefit source rather than property value appreciation.
