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Grading criteria:    Each problem is worth 10 points.

 I expect to see the following: 0 points 1 point 2 points Show correct numerical answer Incorrect Numerical answer is incorrect because of a typo somewhere in the calculations OR Numerical answer is correct but only in some intermediate steps Correct Show correct formulas Not shown Shown for some, but not all, steps Shown for all steps Show correct numbers that go into the formulas Not shown Shown for some, but not all, steps Shown for all steps Brief verbal explanation: why you’re doing what you’re doing in each step Not shown Shown for some, but not all, steps Shown for all steps Appearance Hand-written Partially hand-written and partially typed Typed

Example:

You are offered an investment that guarantees to pay you back \$200 per month for the next 5 years. The annual rate of return for similar investments is 12%. What is the most you should be willing to pay for it today?

(2 + 2 + 2 + 2 + 2 = 10 points)

(1 + 1 + 1 + 0 + 2 = 5 points)

 This is an annuity problem because the problem is talking about the same cash flow (\$200) repeating a number of times. The problem is essentially asking to calculate the Present Value of this annuity. The formula is: PV = C x (1/R) x (1 – 1/(1+R)T). (OR: I can use the financial calculator and enter PMT, N, and I/Y keys to solve for PV.) First, \$200 is repeating monthly, and so I need to use the monthly rate and the number of months. Monthly R = annual R / 12 months = 12% / 12 = 1%. Number of months = 5 years x 12 months per year = 60 months. Then, I plug in the numbers into the annuity formula where I use C=200, R=0.01, T=60. (OR:  Then, I plug all resulting numbers into the financial calculator: PMT=-200, I/Y=1, N=60, CPT PV.) This gives \$8,991.01. So, I would pay no more than \$8,991.01 for this investment.
 N = 5 I/Y = 12 PMT = -200 CPT PV \$720.96     Q: What’s missing? A: Intermediate steps explaining & calculating the right numbers to be used for “N” and “I/Y”. Explanation in own words showing you know what you’re doing.

The questions in this homework are based on data that I would like you to get from 2 publicly available secondary data sources: (1) US Census Bureau (www.census.gov) and (2) Bureau of Labor Statistics (www.bls.gov).

For each question, show in your write-up all numbers you are working with, and explain all relevant calculations. Take a screen-shot, etc. of the website from which your data was downloaded, so I can verify your numbers, and include in your uploaded document.

# Problem #1 (10 points)

The manager of a shopping mall has noticed a continuous drop in overall mall sales in the last few years. Therefore he decided that he might need to attract some new tenant shops. His quick glance at the tenant mix indicated that shops which sell clothing and footwear appear to be underrepresented in his tenant clientele. He knows that the majority of shoppers who come to his mall are people between 25 and 34 years old. The manager would like to identify the best rent per square foot of leasable area that he should offer to new tenants in the clothing and footwear sector. For that, he hired you as a real estate market analyst and asked you to calculate the purchasing potential of consumers in this age bracket for 2018.

• On the Bureau of Labor Statistics (BLS) website go to “Data Tools”. There find database on consumer spending collected from BLS’s Consumer Expenditure (CE) Survey. Both “one-screen data search” (green button) and “multi-screen data search” (yellow button) should be able to help you find the data you need. Spending on clothing and footwear is labeled as “apparel and services”. What are the annual expenditures for 2006-2016? Show results in a table and in a time series graph.

• Forecast the expenditure for 2018 using the moving average (MA) method. From the
• 2-year simple MA,
• 3-year simple MA,
• 2-year weighted MA,

and  (4)    3-year weighted MA

methods which one should you use for your 2018 forecast? Why? Show and explain all calculations, and show the numbers you plug in to do your calculations.

Problem #2 (10 points)

A real estate investment company in Southern California is applying for a construction loan for a proposed new gated community with 250 single-family detached houses. If the loan is approved, it can start the construction as early as next week and have all houses completed and available for sale in 2018. The company’s research department recently performed a market study and identified Orange County, CA to be the main trade area that will draw the majority of households interested in buying the houses.

For both parts (a) and (b), show and explain you calculations, and show the numbers you plug in to do your calculations.

For the source of data, go to the US Census website, on the main page scroll all the way down and click on American FactFinder, then go to Advanced Search, and select your search criteria.

• What does the company’s research team project for the total number of households in 2018? The team used the regression forecasting technique. It obtained information on the historical numbers of households in Orange County, CA for recent three years, 2014, 2015, 2016, from the US Census Bureau website, 1-year estimates, based on the American Community Survey (ACS).
• What is the required capture rate for this project, assuming the demand for new housing comes only from the increase in the number of households in the trade area?

# Problem #3 (10 points)

Parts (a) and (b) of this problem are looking at the Location Quotient technique that is commonly used by real estate market analysts to see how concentrated a particular occupation, industry, demographic group, etc. is in a specific region as compared to a larger geographic area, such as the entire nation.

For both parts (a) and (b), show and explain you calculations, and show the numbers you plug in to do your calculations.

For the source of data, go to the US Census website, on the main page scroll all the way down and click on American FactFinder, then go to Advanced Search, and select your search criteria.

• You are interested in the concentration of employees in different industry sectors – in a metropolitan statistical area of your choice as compared to the entire USA. The US Census website has information on the number of employees in your base area in different NAICS sectors. When you do your analysis pick the most recent available year. Which year is that? What do the results tell you about potential real estate investment opportunities in your picked analysis area? What type of investments would instead not be a good idea?
• Now, do similar Location Quotient calculations, except this time based on the population distribution by age rather than employment by industry. Compare any county of your choice with the entire state in which it is located – what are the relative concentrations of the population in different age groups? What does this tell you about potential real estate investment opportunities? For example, you may find that your chosen county has a high concentration of the population above 65 compared to the state statistic, which may suggest a good potential for senior housing developments; and so on. Again, show the numbers for the most recent year with available data (which year is it?).