Housing: Production and Costs Survey

This term paper will discuss the compare and contrast production and costs associated with housing production in the Northern Virginia area over the past three years. The housing market in the past three years has seen a significant increase in prices, but in the last year the prices have fallen to record percentage levels.


I. Housing Market Three years ago.

II. Current Housing Market

III. Future Trends in the Housing Market


Please create at least one graph

Topic: The state of housing market in China: A critial survey of the literature

GUIDELINES: ECON PROJECT
The goal of Econ project is to give each student in the course some hands-on
experience with conducting a piece of applied research on a topic in
microeconomics of his or her choosing. The student may make this choice from the
list of suggested topics (see course outline).
The project may take one of two possible forms or approaches
1. Conducting a survey of the literature on your chosen topic.
-The survey must be both critical and comprehensive, and not just descriptive and narrowly focused.
-A good survey must rely on economic reasoning, supported by suitable graphs, tables, and other relevant information
-A variety of relevant sources (books, journals, magazine articles and internet resources) must be used and listed in the bibliography section at the end ofthe essay
2. Model Estimation and/or Hypotheses Testing.
Examples of this approach to your project include (a) estimation of various types
of elasticity of demand for a group of products using either a single equation
demand function, or a Demand system (Rotterdam system or the AIDS system)
and (b) testing the validity of demand theory.
This approach will require you to (i) choose the model (demand equation) (ii)
collect relevant data for estimating the model (iii) estimate the parameters of the
model using a statistical program of your choice (iv) report and statistically
interpret the results of your estimation or testing (v) explain the economic
significance of your results .

The write-up ofyour research project should include the following sections.
a.
A tittle page, including a descriptive title, name ofthe author, and address (Economics Department) and date ofsubmission.
b.
An abstract (no more than 100 words) summarizing the study.
c.
An introductory section, describing the general nature and the objective ofthe study. It should include a description ofthe methodology used for the study
d.
Short Review ofexisting literature. This section should summarise theory of the subject and empirical findings ofprevious investigations on the subject.
e.
Model Selection, the Dataset, Estimation and the Results. This section should specify and describe the model including the expected signs ofthe coefficients, the definitions ofthe variables, data transformations, and data sources.
The results of estimation and testing relating to your project should be systematically organized and reported in the form oftables. It is expected that you will then analyze and evaluate the statistical and economic significance of your results using the appropriate goodness-of-fit statistics and diagnostic tests (R-barsquare, standard errors, t-ratios, Durbin-Watson statistics etc) and also discuss any problems of multicollinearity, serial correlation or heteroscedasticity that may arise in the process of fitting your model to the data.
f.
A section on overall conclusions ofthe study. This section should present the main findings of the investigation with respect to the objectives set out in the introduction ofthe study. It may contain suggestions for future studies on the topic.
g.
A bibliography, including complete citations of all articles and books referred to in the paper.

Please use the book "Housing Markets in the United States and Japan"
Author: Yukio Noguchi and James M. Poterba, The University of Chicago Press- 1994

please focus on Japanese housing market systems.

The paper should utilize the following outline:

Recently the US housing market has seen significant drops in house prices, combined with record levels of mortgage defaults. Many economists and housing experts have suggested it is a bust that was inevitable to occur. This paper will address why the US Housing Market has gone from boom to bust.

1. House Prices Rose at Unprecedented Levels.
a. Historically US House prices have increased at a similar rate to rents; however in the last period of the housing boom the ratio of House prices to rents had grew at a rate of 78%.
2. Aggressive sale of Sub Prime Mortgages.
a. Usually when house prices rise, demand moderates. However in the case of the US housing market, mortgage lenders were desperate to maintain sales. Therefore they just found new ways to sell the more expensive houses.
3. Increased Promotion of Discounted mortgages.
a. For the first year or two the home owner gets an introductory interest rate, making mortgage payments cheaper and more affordable. However after 2 years the interest rates jumps to the standard variable rate and many households on low incomes took out mortgages they will later struggle to pay.
4. Increased use of Variable Adjustable Mortgages.
a. The rise in Adjustable mortgages is most prominent amongst low income families. The growth in ARMs between 2000 and 2004 accounted for about two-thirds of the relative increase in variable interest debt.
5. Rising Interest Rates.
a. Because of weakness in other areas of the economy monetary policy was loosened in 2002. Regarding economic growth and inflation this was very positive; however it ignored the implications for the housing market. Low interest rates were a stimulus for those on low income and bad credit records to buy a house for the first time. However as interest rates have increased from 1% to 5% it has increased the cost of mortgage payments for homeowners. For example a 2% rise in interest rates can increase the cost of mortgage interest payments by 40%.
6. Speculation
a. The Housing market was providing greater returns than the stock market. As house prices start to fall this section of the market changes completely.
7. Excess Supply
a. The housing boom encouraged an excess of new houses being built. The supply of housing now exceeds the demand; therefore the price of housing is likely to continue to fall.


The following secondary sources were submitted with my outline; please site these in addition to the 6 primary sources necessary:
http://www.americanprogress.org/issues/2006/12/end_of_the_boom.html

http://www.americanprogress.org/issues/2006/12/end_of_the_boom.html

http://patrick.net/housing/crash.html

My topic is about the future housing market and how will the housing market be for the future. How can we get out of this bad situation and will the housing market rebound for the future? Are the rates low now and if so does anyone know for how long? No plagiarism and if you cite something, please put the source after the sentence.

Individual
Article Analysis

Using the Electronic Reserve Readings (ERR) for ECO365, the Course Web Links, University Library, Internet, and/or other sources of literature, locate an article concerning trends in consumption patterns (I have attached one below that we should use)

This is the reference they used in the electronic reserve reading:


New York Times (article)
BUSINESS DAY | August 24, 2011
Sales of New Homes Fell Again in July
By CHRISTINE HAUSER
The housing market is showing little sign of recovery, according to the latest government data.
http://us.mg6.mail.yahoo.com/neo/launch?.rand=6qqd2dkbm6unm

Citation:

Hauser, C. (2011, Aug 24). Sales of new homes fell again in july. New York Times, pp. B.6-B.6. http://search.proquest.com/docview/884825381?accountid=35812


Prepare a 1,050-1,400-word paper in which you:
Define economics
Define microeconomics
Define the Law of supply
Define the Law of demand
Identify the factors that lead to a change in supply and a change in demand
Analyze the basis for the trends in consumption patterns as discussed in the article.

In your analysis, consider the utility derived from the products mentioned in the article, describe what has occurred to change the demand for, or the supply of, the good or service, and market prices of those products or services.

Format your paper consistent with APA guidelines.



An alternative reference might be from this text book (if needed):
Economics, Eighth Edition
Economics, 8e
ISBN: 9780073375885 Author: David C. Colander
copyright 2010 McGraw-Hill Company


Copy of article but more detail is available through actual web link listed above.
Sales of New Homes Fell Again in July: [Business/Financial Desk]
Hauser, Christine
. New York Times [New York, N.Y] 24 Aug 2011: B.6.
Turn on hit highlighting for speaking browsers
Abstract (summary)
demand for new homes is stagnant despite record low mortgage interest rates, and competition from foreclosures continues to cloud the sector, said Joshua Shapiro, chief United States economist at MFR Inc.

Full Text
The housing market is showing little sign of recovery, with sales of new homes in the United States down again in July, according to the latest government data.
Sales of new homes reached an annual rate of 298,000 in July, down from a rate in June that was revised to 300,000 from 312,000, the Census Bureau report said. The July figures fell short of analysts' expectations for a rate of 310,000.
The median sales price of a new home was $222,000 in July, also down from the previous month. The stock of new homes for sale at the end of July was 165,000, the lowest this year, and would last slightly more than six months at the current sales rate.
For months, most indicators of the housing market have suggested bleak conditions. The number of permits issued to builders of single-family houses has also declined.
Patrick Newport, United States economist for IHS Global Insight, said that his company had forecast that sales of new homes would fall to a record low this year, 319,000, compared with 321,000 in 2010.
"It has gotten worse for builders," Mr. Newport said. "They are stuck in a market where they cannot sell new homes."
In addition, demand for new homes is stagnant despite record low mortgage interest rates, and competition from foreclosures continues to cloud the sector, said Joshua Shapiro, chief United States economist at MFR Inc.
"This suggests that prices will continue to edge lower at the bottom end of the market even as demand for these homes picks up a bit," Mr. Shapiro said.
The sales rate in July came close to the record low of 281,000 in February, and the level of inventories in recent months this year has been the lowest recorded since December 1967, he wrote in a research note.
"We are just bouncing along the bottom," Mr. Shapiro said in a telephone interview. "There is no indication out there that anything is improving. It is bouncing along at historic lows at this point."
Economists said it would take a turnaround in the American job market to return some vitality to the housing sector.
"We need job growth but in conjunction with that, housing prices have got to stop dropping," Mr. Newport said.
Still, one analyst said that the market was showing the potential to recover in the years ahead despite weakness in the monthly data. The analyst, Russell Price, a senior economist with Ameriprise Financial, noted that median and average prices were higher in July compared with a year ago.
"Generally we are forming a base in the housing sector this year," he said. "On aggregate, I think that conditions are solidifying at historically low levels. We are unlikely to go any further down."
Mr. Price said, "As the economy does recover, and you get less competition from foreclosure sales, the market is poised for a relatively solid rebound in the years ahead."
Chart
New-Home Sales: Annual Pace of New Private Homes Sold During the Month, Seasonally Adjusted.; Prices of New Homes: Median Price for New Homes. (Source: Commerce Department)
Copyright New York Times Company Aug 24, 2011

Cite
Subject
Housing starts;
Real estate sales;
Housing prices;
Competition;
Economists
Location
United States--US
Title
Sales of New Homes Fell Again in July: [Business/Financial Desk]
Author
Hauser, Christine
Publication title
New York Times
Pages
B.6
Publication year
2011
Publication date
Aug 24, 2011
Year
2011
Section
B
Publisher
New York Times Company
Place of publication
New York, N.Y.
Country of publication
United States
Journal subject
General Interest Periodicals--United States
ISSN
03624331
CODEN
NYTIAO
Source type
Newspapers
Language of publication
English
Document type
NEWSPAPER
ProQuest document ID
884825381
Document URL
http://search.proquest.com.ezproxy.apollolibrary.com/docview/884825381?accountid=35812
Copyright
Copyright New York Times Company Aug 24, 2011
Last updated
2011-08-24
Database
3 databases
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Citation:

Hauser, C. (2011, Aug 24). Sales of new homes fell again in july. New York Times, pp. B.6-B.6. http://search.proquest.com/docview/884825381?accountid=35812



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i need to see the interst rate effect on housing market and if it elastic or inelastic what are the reasons that effect interst rate ? would you please let me know if it is do able with in less then 8 hours. the data that i need on interst rate is from 1996- 2006 thanks

Module 5 - Case
Business cycles: phases, indicators, measures, economic evolution, outlooks
Read the two articles below and do some of your own research on current macro-economic conditions and the business cycle. Use the CyberLibrary or Internet search engines. National economic data are available from the U.S. Department of Commerce, Bureau of Economic Analysis www.bea.gov .
Yellen, Janet L. (2009). The Outlook for 2009: Economic Turmoil and Policy Responses, President's Speech: Presentation to the Financial Women's Association. Federal Reserve Bank of San Francisco. Accessed February 16, 2011. This is an interesting recent historical article that still holds true in today's economy.
In a 4 to 5-page paper focus on the following questions.
ation: underline;">Please copy the following questions on the title page of your paper
1. The US is currently recovering from its worst recession in over 25 years. Most economists consider the rapid rise in housing prices (the bubble) and the subsequent collapse in that market to be the primary cause of the recession. Explain what housing market circumstances were responsible for the collapse of that market.
2. Economists classify macro-economic indicators as leading, lagging, or coincident. Define each classification and give two examples of each, relating them to the recession that began in 2007 and the recovery that is now under way.
3. All major economic indicators show the United States is recovering from the recession but that the process is not as strong as previous recoveries have been. If you were the President what would you do right now to help the economy recover so that the unemployment rate decreases faster than it has over the past two years?
Case assignment expectations:< ;/strong>
Use information from the modular background readings as well as any good quality resource you can find. Make sure you cite all resources you use and provide a reference list at the end of your paper.
LENGTH: 4-5 typed and double-spaced pages.
In addition to the overall quality, depth, grammar, and organization of the paper, the following will, in particular, be assessed:
1. On your demonstrated knowledge of what constitutes a business cycle, its causes, and possible ways to avoid them in the future.
2. Your ability to apply the concepts and knowledge learned in this course to formulate your own ideas about resolving economic difficulties.
BACKGROUND MATERIAL

Khan Academy Video: click here
Amos, O. (n.d.). Our circular world. A Pedestrian's Guide to the Economy. Retrieved February 16, 2011 from: http://www.amosweb.com/pdg/
Amos, O. (n.d.). On the lookout for a recession. A Pedestrian's Guide to the Economy. Retrieved February 16, 2011 from:
http://www.amosweb.com/pdg/
class="MsoNormal">Carlstrom, C.T. and T.S. Fuerst. (2001) Perils of Price Deflations: An Analysis of the Great Depression, Economic Commentary, Federal Reserve Bank of Cleveland, retrieved on February 16, 2011 from:
http://clevelandfed.org/Research/Commentary/2001/0215.htm

Strauss, W. A. (2009), Economic Outlook Symposium: Summary of 2008 results and forecasts for 2009. Chicago Fed Letter, Federal Reserve Bank of Chicago, February, retrieved on February 16, 2011 from:
Optional Readings:
A good place to start is this Overview of Business Cycle Theories from Dr. Robert Schenk of Saint Joseph's College.

Professor Nouriel Roubini (New York University) has an interesting online macroeconomics course available here. You might like to follow along with him for another take on our material.
The Resources for Economists page always has interesting and current links to follow up.
Economics on the Web always has interesting current links as well.
On-Line Text Materials
The following web page provides excellent list of the business cycles indicators and explanations for these indicators:
http://pages.stern.nyu.edu/~nroubini/bci/bcibase.htm
See the following list of economic indicators used to measure business cycles.
Business Cycle Indicators: Sources of Data, Reports and Analysis

FRED Database of Macroeconomic Data
At FRED, you find thousands of macro series from the database of the Federal Reserve Bank of St. Louis. One of the largest collections of data on the U.S. economy.
The Dismal Scientist
An excellent source of information, data and analysis of the most important business cycle indicators. Java applet allow to plot data for each indicators over different time samples.
The Economics Section of About.com
An excellent resource for Economics information.

Bank of America's Economics and Financial Reports
Bank of America carries out economic and technical research in a number of countries across the globe. Every day their analysts study the latest economic and financial news, and publish a variety of reports. Topics include: the U.S. Economy; Weekly U.S. Economic Briefing; Monthly survey of Wall Street economists from Economics Illustrated; Economic Indicators (monthly); Economic & Business Outlooks; Special Reports; The Global Economy; Weekly International Economic Briefing; World Information Services (Country Outlooks, Country Data Forecasts, and Country Risk Monitor); Economic & Business Outlooks; Special Reports; Foreign Exchange Markets; Technical Analyses (monthly).
News Summary and Analysis of Recent Indicators
Wall Street Journal - Economic Indicators Archive
This page is part of the WSJ Interactive Edition (this is a paid service). It provides direct links to official government reports on most business cycle indicators.
CNNfn - Economy page
This is the economy page of the CNNfn website. The page provides brief updated news summaries of recent reports on business cycle indicators and articles on the economy.
Official Sources of Reports and Data
Bureau of Economic Analysis at the Commerce Department. www.bea.gov
Bureau of Labor Statistics at the Labor Department. http://www.bls.gov/
Bureau of Census. http://www.census.gov/

Topic: Cohousing: a model for Austrelia?
Cohousing began as an idea for living with "100 parents" and as a way of easing the burden of raising a family in a nuclear model. Cohousing is a small but growing sector of the housing market in northern Europe, and has become increasingly popular in the UK, and more schemes are beginning in Australia.
Discuss the histroy of, and variety within, cohousing and what has influenced its development within Europe. What factors may increase or hamper its deveopment within Austrelia? Include a discussion of the influence of housing development models, social and cultural context and Australia's housing histroy. Illustrate your essay with plans and images of cohousing an other housing types, relevant to your argument.


Please add at least 5 images and 2 plans of cohousing in the essay. Please write at leat 3 quotations. 3 cohousing types need to be analyzed in the essay. One frome Europe, one from Japan and the other one from Australia.

There will have a lecture recording about cohousing will give you as well. Please use some quots or imformations from the lecture. There is a suggest reading list, I may suggest you to get the infromation from those readings. If you couldn't find these readings from website, I will give you my username and passworld of my university web, you can access to get the readings from library online. Also I will email you some readings I photocopyed from a book.

Suggeted readings:
1. McCamant, Kathryn, and Charles Durrett. Cohousing: A Contemporary Approach to Housing Ourselves, rev. ed. Ten Speed Press:Berkeley, California, 1994.
2. Cooper-Marcus, Clare. Site Planning, Building Design and a Sense of Community: An Analysis of Six Cohousing Schemes in Denmark,Sweden and The Netherlands. Journal of Architectural and Planning Research 17 (Summer 2000)
3. Durrett, C, 2005, Senior Cohousing: A Community Approach to Independent Living, Ten Speed Press, Berkeley, California. [Extract]

There is a critera list that this essay was asked for.
1. Topic: demonstrate a reasonable grasp of the topic and accords with the required length of the assignment.
2. READING: demonsrate a reasonable amount of reading for the topic, independent or further reading or research is welcome but not at the expense of recommended literature or sources in the suggested readings list.
3. SCHOLARSHIP: reasonably accord with scholarly requirement, especially in respect of th acknowledgment of sources.
4:ENGLISH: display a reasonable standard of English expression
5: FIGURES: the use of Figures(diagrams, drawing, photographs etc.) in developing or illustrating, but not decorating, your grgument, you should indicate how a Figure is relevant in your discussion, the essay should be well presented.
6: LECTURES: the use of lectures.
7: RESEARCH: useful independent research and in particular.
8: ANALYSIS: analysis or critical discussion.

Please give a really good introduction and conclusion.

I am looking forward your work. Thank you very much.
There are faxes for this order.

This is for Economics 321 Money & Banking
Need to read these articles on the housing bubble.
Then write a 500 word essay in which you "elastically apply" Charles P. Kindleberger's (Manias, Panics, and Crashes) model of the financial cycle to the U.S. housing market and its likely prospects. This is presented in Kindlebeger's book Manias, Panics, and Craches.

No quoting can be used. The 500 words must be our own.

I will email or fax the 5 articles we were given.

If you can not do this or have any questions please let me know at [email protected]
Thanks
There are faxes for this order.

** REport to be writen in BRITISH ENGLISH

**I prefer a British writer with knowledge of the UK property market that can use econometrics model to demontrate the relationship between different variables of the property market and test test the hypotheses.

**The writer should collect primary research fromthe UK as specified in my project proposal below.

** All reference MUST be available to me in linksor sent by mail.

**The Litterature review must be at least 3500 words

** The bibliography should be attached to the report

**************
***********************
******************************

Project Report
The subheadings should be as follow

* Abstract
Introduction
Background
Literature Review
Methodology
Data analysis, Test and Results
Discussions
Conclusions


I have below listed questions or key points that are relevant to each section

= An Abstract


Introduction

In this part should i be answering the questions below
???? What was the overall subject of your research?

???? What was the main aim of your research?

???? What specific business related questions or issues did you address in your research? Why is the residential property price is falling in of the?


???? Why did you pursue these questions or issues in your research?

????Did you have any expectations of what you might find out at the start of your research? If so, what and why, and have these changed, and why?

???? Highlighting the main point of each section as it relates to the title.

???? Being able to show the reader what makes my research different to the previous research


Background Information

This section is about
???? What are the main goods and services of the industry involved ie finance, mortgage property

???? What is the historical/social/ economic background of the Uk Residential property? The scope is London

???? What are the values, culture or policies underpinning the UK Residential property? London

???? What is the background to the particular situation or phenomena examined? If relevant, why has a particular situation arisen?



Literature Review

This part should answer these questions
???? What previous research has already been done on this topic? Who did it, when and why?

???? What conclusions did previous researchers reach?

???? How relevant are these conclusions today generally and for your own research?

???? How does your research build on previous research? How is it similar or different (e.g.
similar/different models or methods used etc),

???? Who are the principal commentators and theorists in the subject you researched?


Methodology

I must be able to answer to the questions below in this part of my report
???? How has the previous research influenced the research methodology and methods?

???? What philosophical approach did you take to your research,
e.g. qualitative/Quantitative? Inductive/Deductive?

???? Why did you adopt this approach?

???? In retrospect was this the correct approach?
???? What methods (to gather primary/secondary data) did you decide to use and why?

???? What criteria did you adopt for collecting this data (e.g. target number, age, gender,
occupational etc) and why?

???? If relevant, who are the main people involved in the research and their roles and
responsibilities?

???? What was the target sample number? What type of sample was it, e.g. a random sample?

???? What was the actual number you achieved? Why was there a shortfall?

???? Where did you collect the data? When did you collect it? How did you collect it?

???? Who was involved in the collection?



Data Analysis Test and Results
must be able to tell or to answer

How was it analysed? What analytical method(s) did you apply to draw the results?

???? What logistical or other problems did you encounter in collecting or analysing it?

???? What was the result of the findings?

???? Were the results affected in any way by any event, situation or phenomenon?

???? If there was a shortfall in the amount of data you gained, how have you compensated or dealt with this situation?

???? How does the amount of data collected by you compare or contrast with previous research in this area of enquiry?

???? What is the best way of presenting these results in the report?


Discussions
In the results I must be able to explain

???? How do the findings connect with the overall research aim and research questions?

???? What do the findings mean in theory and/or practice?

???? How unexpected/expected were some or all of the findings?

???? How can the findings be applied?

???? When can they be applied?

???? Who could apply them?

???? What recommendations can be made based on the research findings?




Conclusions: Some questions to ask

???? the main aims and findings of my research?

???? the practical or applied applications of my findings for others?

???? the unexpected problems that arose and the limitations of the research?

???? How future research might build on where I left off?

???? The last sentence I will write?


Research objectives
The objective of my research is to investigate to what extend the instability in the financial economy has affected the UK residential property market especially in the South East of the England. The special focus is to explore the possibility that the falling price of property can develop a new trend in home ownership and the buy-to- let phenomenon which in the last decade has been seen as an investment heaven for households and investors.


Expectations of outcome and conclusions
The expectations from my findings should indicate that in spite of the falling price of property in the UK in general in some areas the price are stable or increasing. There could still be an opportunity for Buy-to-let investor to increase their portfolio. The finding should indicate that the attitude towards ownership is in decline and that the rental market is increasing. The conclusions should be based on the finding that the preference for rental market is an opportunity for buy to let investors which could create a niche market for some mortgage lenders.



Please below is the project proposal marked and approved by my supervisor


Project Proposal MBA


Title: The Effect of the credit crunch on UK Residential property: Is there an opportunity for the buy-to- let?


Introduction

What began last year as a problem in American funds exposed to subprime mortgages has snowballed into one of the worst financial crises in modern history (Rayner, 2008). In the third quarter of 2007 the credit crunch shook the USA financial industry and sent shock waves to the rest of the world. Almost all financial institutions were affected lenders can no longer raised fund on the money market. Most banks especially those in the subprime market tightened the lending criteria between themselves and to customers. This financial instability first casualty was Northern Rock, the fifth mortgage lender in the British market who could no longer borrow money from the US Banks to finance its activities seek liquidity from the Bank of England, which precipitated its collapse and nationalisation (Giles, 2008). The housing market has experienced a downfall in mortgages approval and a subsequent slow down in the property market leading to an annual 10.9% drop in property prices across the UK as reported by Halifax leading mortgage lender (hbos, 2008).

Research Objectives

The objective of my research is to investigate to what extend the instability in the financial economy has affected the UK residential property market especially in the South East of the England. The special focus is to explore the possibility that the falling price of property can develop a new trend in home ownership and the buy-to- let phenomenon which in the last decade has been seen as an investment heaven for households and investors.

Research Questions

The questions to guide through my research would be:
Why are bank reducing their loan and mortgage approval?
How home-owners and investors are reacting to the change in market condition?
Which areas are the most affected?
Are we facing the end of home ownership and increase in renting?
Is there a bargaining power for cash rich buyer?

Relevance
Over the past 12 years the property industry has enjoyed a sturdy and sustained period of growth, which has seen the average property price tripled (Mintel). This boom has encouraged a large percentage of the UK household to invest in home-ownership with most purchasing a second home. The Mortgage lenders increased flexibility to borrower and expanded their share on the buy-to-let market coupled with the increased media hype around the profitable property market; many consumers seized the opportunity to become landlords, property developers/investors.
However, in the last quarter of 2007, the housing market has experienced a low level of mortgage approval and a falling price of property. More than a year on, the situation rather than improve continue to slump.
The relevance of this research is: when the price of property fall and mortgage rules are tightened who can benefit from the situation.

Research Methodology

Quantitative research described as the research strategy that emphasises the quantification in the research of data, will be the predominant method used for my research (Bryman and Bell, 2007). Qualitative approach will be included to search for consistencies and trend in the increase for preference for rental over property ownership will also be included.

Part of the research method will consist of keeping a diary, as the subject of the dissertation is based on an ongoing situation which will guide the progress and conclusions of my research.


Data Collection
The collection of information will be a combination of primary and secondary data. For my secondary data, a range of carefully selected sources including government institutions namely the Bank of England, the Office for National Statistics; major players in the property market, the Council of Mortgage Lenders, the RICS, Estate gazette and broadsheet newspaper specialised in the economy and financial market will be reviewed as well as various researchers articles on the topic. This will ensure the validity and reliability of the research.

Primary data will be collected using questionnaires with both open and closed questions that will be distributed to various mortgage lenders such as Halifax Plc. Nationwide and Bradford and Bingley Building Society as well as to buy-to-let investors and private landlords. This survey will give me insight data on consumers attitude on property towards the current financial situation.


Expectations of outcome and conclusions
The expectations from my findings should indicate that in spite of the falling price of property some areas are not affected. There could still be an opportunity for Buy to let investor to increase their portfolio. The finding should indicate that the attitude towards ownership is in decline and that the rental market is increasing. The conclusions should be based on the finding of the preference for rental market is an opportunity for buy to let investors which could create a niche market for some mortgage lenders.





Reference list


Bryan A. and Bell E., (2007) Business research method, Oxford University, United Kingdom

Giles, C. (2008), Northern Rock-one year one, Financial Time: http://www.ft.com/cms/s/0/3ca21616-8112-11dd-82dd-000077b07658,dwp_uuid=74d73d92-650f-11dc-bf89-0000779fd2ac.html accessed 16/09/2008

Griffiths, R. (2007), UK feels weight of the credit crunch. Mortgage strategy , 49-49
Available from: Business Source Complete Fulltext [accessed1 september 2008]

Muellbauer, J and Murphy, A., (1997) Booms and busts in the UK housing Martket, Economic Journal 107 (445), 1701-1727. [online] Available from: Web Knownedledge Fulltext


Rayner, G. (2008), Credit Crunch Timeline: from Northern Rock to Lehman Brothers, Telegraph: http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/09/15/bcntimeline115.xml, accessed 16/09/2008



Websites:

Bank of England: http://www.bankofengland.co.uk/financialstability/index.htm

Council of mortgage Lender: http://www.cml.org.uk/cml/media/press/1893

Royal Institute of Chartered Surveyors http://www.rics.org/Newsroom/Keyissues/UKresidentialpropertymarket/hms_aug2008_090908.htm.htm

Office for National Statistics: http://www.statistics.gov.uk/

Mintel:
http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&/display/id=290765

Halifax: http://www.hbosplc.com/media/pressreleases/articles/halifax/2008-09-04-HousePrice.asp?section=halifax

Please keep as seperate questions

Chapter 22: Federal Legislation and Impact to the Real Estate
Chapter 22 introduces four major pieces of federal legislation that has impacted the real estate industry and links federal involvement in housing to the U.S. Constitution and the Bill of Rights. It is widely accepted that the federal, sate and local governments have a vested interest along with the constitutional obligation to promote fair housing and equal access. Do you agree or disagree with this position that the federal governments obligation to regulate the housing industry and real estate is linked to the US Constitution and the Bill of Rights? Justify your response. Which piece of federal legislation do you consider to be the most critical law that protects the public? Why? In addition, during the past 18 months or so, Congress has aggressively passed legislation to protect homeowners from foreclosure. Is that appropriate?

Chapter 23: Condominiums and Timeshares
Condominiums and timeshares area growing segment in the housing market particularly in urban and resort markets. What are some of the major issues/concerns that buyers should be aware of when investigating the condo/timeshare market for housing? Is there an active condo/timeshare market in your current location?

Chapter 24: Property Insurance
Chapter 24 is a straight forward discussion of the very basics of property insurance. Why do lenders require property insurance and, more to the point, what type of insurance do lenders normally require? What are some of the possible consequences should a home owner allow the policy to lapse? (Hint: this is NOT a discussion of the role PMI plays in the purchase of a home but rather casualty insurance.)

ASSIGNMENT

A price ceiling sets the maximum price at which a buyer and a seller can make a trade. Rent control is the economist's classic example of a price ceiling and of what happens when governments prevent capitalistic acts between consenting adults.
Please address either one of the following discussion points (Please make sure to provide references for your research):
1.Most economists have long argued in introductory microeconomics classes that rent controls are bad policy. What is the basis for arguments against rent control? Can you list and discuss some arguments against rent controls?
2.If the economists' argument is correct that rent controls do more harm than good, why have rent controls existed in so many U.S. cities? What is the basis for arguments in favor of rent control? Discuss who directly benefits from instituting and maintaining rent controls besides the renters who occupy the lower-cost housing.
3. Check out the housing market in your home town (or in a city of your choice). What regulations if any, exist that control the market interaction of landlords and renters? What goals are the regulations intended to achieve?

Personal Statement-Anwser the question- To what extent has your background prepared you for the professional education you now seek?
This is a personal statement for an application for a Master's of Real Estate. I am traveling and do not have a spare moment. Here is my background. Please let me know if you need anything else.
Thanks, Dave


J&T Development, Denver, Colorado
Analyst ?V Acquisitions July 2001 ?V February 2004

J&T is a privately held Real Estate Investment Trust specializing in property management and investment services. J&T has established itself as an industry leader through an impressive array of products and services including community management, and a network of financing partnerships.


Acquisitions Experience

?? Participant in placing over $65 million in assets under contract and closing $40 million in assets over a 30 month period.
?? Performed in-depth research and evaluation of housing markets through identification of employment and economic conditions, trend analysis and trade profiling.
?? Researched projected tax implications, zoning compliance issues, and environmental risk.
?? Assisted with contract negotiations and coordinated the due diligence process.
?? Maintained relationships with owners, brokers, and developers.

Valuation Experience

?? Prepared extensive financial valuations for potential acquisitions including 4-year proformas, capital expenditure summaries and capitalization rate analyses.
?? Evaluated potential acquisitions of distressed platforms through financial statement analysis and restructuring scenarios.

Operations Experience

?? Senior Analyst in J&T??s $100 million recapitalization transaction.
?? Developed and implement ancillary revenue initiatives to increase overall funds from operations.
?? Participant in the acquisition of $30 million of distressed inventory to bolster J&T??s occupancy and increase revenue.

Chateau Communities, Denver, Colorado
Acquisitions/New Business Ventures Fall 2000

?? Assisted in the creation of a disposition decision matrix to identify under performing assets for potential sale.
?? Conducted resident profile research to develop a resident retention program.

We will offer more for this one!!

Recommend the major strategies the home building industry
should pursue in light of the economic projections of 1st indicator: Interest rate & 2nd indicator: Housing starts. Thoroughly explain your reasoning. Approx. 400 words

Here is the source:

Home Building Industry
?Macroeconomics is the study of the economy as a whole. It considers the problems of inflation, unemployment, business cycles, and growth. Macroeconomics focuses on aggregate relationships such as how household consumption is related to income and how government policies can affect growth.? (University of Phoenix, 2004) The industry of home building has been greatly impacted by macroeconomics in areas such as unemployment rate and inflation rate. Because of the recent boom in home building throughout the United States, interest rates have remained low, but the housing market should level off in the near future, and interest rates will start to climb again. This could cause problems for potential buyers as well as sellers, and home building may begin to slow down.
Throughout the last century many aspects of our economy and way of life were permanently altered as a result of governmental involvement and the development of finance options, never before seen in the residential construction industry. When the Housing Act was established only 55% of American families owned their own homes. Prior to 1949, long-term amortization loans did not exist, forcing homebuyers to pay cash for their homes. As part of the Housing Act, prime rates for loans were established allowing a drastic increase in those wishing to buy their own home to attain financing.
In addition to financing availability, the increase of the average income and growth in population led the economy to have a few setbacks. For example, when interest rates are high home purchases are low. In addition, many individuals seem to upgrade their homes like they do cars; as their rate of income increases, so does the size or cost of their home.
Today, the residential construction industry represents $550 billion or 55% of the entire construction industry. This rate is the highest in the past nine years and is a result of a 19% jump in new single-family home construction. In addition to this, the multi-family unit construction did well with a nine percent increase, representing $39 billion in 2004 (Simonson, 2005, p. 66). This increase is a result of a growth in the demand of condominium life with the family often purchasing second homes in vacation areas or in warmer climates. These homes represent the presence of a trend in which older individuals, instead of downsizing are choosing to increase the space they occupy as well as providing them with a method to invest some of their retirement funds.
The construction market, in general terms, often experiences growth as population and migration move into metropolitan areas. This rate of growth is estimated to represent eight percent of the Gross Domestic Product due to effects the construction industry has on products, services, and components used in the construction process.
Forecasts for 2005 and 2006 have predicted that the residential construction industry, will suffer a slight decline due to the rise in the interest rates, resulting in higher payments for consumers (Simonson, 2005, p. 67). Even if the decline is moderate, the industry will still need to take into account the price increases that other industries are experiencing and factor these costs into their bottom line. If the cost of the home has stayed the same but the cost of the land, raw materials, and labor has increased then they will eventually affect the price of the home (p. 67).
To better understand the home building industry the strengths, weaknesses, opportunities, threats, and trends (SWOTT) of the industry need to be understood. Each will illustrate the industry as a whole. Home building has certain strengths. Building products have become more affordable due to advancement in technology. People are more interested in a custom home that fits their needs than buying an already existing home. New materials, technology, and installation processes help lower the over cost of building.
An increase cost in housing prices, an oversaturated trade-up market, and labor costs are all weaknesses of the home building industry. If builders concentrate in one area there is a risk of homes sitting on the market longer than expected. If the economy shifts and interest rates increase, people will not be able to afford to buy.
There are a number of opportunities in the home building industry. Technology allows companies to monitor and examine their cost more readily. Economically, people feel investing in real-estate is a safe investment and want to own multiple properties to use as a future investment and possibly even as retirement income.
Interest rates are considered a threat because they fluctuate. He who takes on adjustable-rate mortgages (ARM) is taking the biggest risk. For instance, one who has an ARM has a reduced payment, but if interest rates rise he will see an increase in his monthly payment. Household income is also a risk, foreclose rates could increase as a result. In today?s world people are busy. They seem to want to own a newly built home rather than refurbishing an existing home. Building materials are continuously being improved and made to last longer and requiring less maintenance.
?The Gross Domestic Product (GDP) is the total market value of all final goods and services produced in an economy in a one-year period.? (University of Phoenix, 2004) The home building industry contributes to the GDP in that the home building industry is one of only a few industries that are growing upward. In May, 2005, Toll Brothers Incorporated, a large home building organization, reported a growth of 3.5% higher than previously forecasted, after the company reported doubling its profits in the first quarter. In addition, new home sales and existing home sales have also shown an increase in recent years. Though the growth is expected to slow by the end of 2005 the industry has extended the expected quarterly profits. Toll Brothers Incorporated saw a 3.5% increase in the value of its stocks.
New construction has increased over the past 10 years and the unemployment rate in the construction industry has decreased as a result. In 2004 the construction industry reported 828 extended mass layoffs. (NAICS 23: Construction) In 1995 there were approximately 4,113,000 production workers. That number has increased to about 5,330,000 in 2004. The construction industry has seen a growth when other industries are struggling. By the end of 2005 this industry will experience a slow down in production. Currently, the construction industry employs approximately 29% of the total employment in the goods producing sector. (NAICS 23: Construction)
Inflation rates are a large concern for everyone that is involved, or plans to become involved in the housing market. Home builders have had the luxury of being quite busy over the past several years. This is due in large part to the low interest rates that mortgage companies are offering customers. This has meant big business for the people who build the homes.
This also means that people are willing to pay a great deal larger than the ?sticker price? for the homes. They feel that because of the interest rate the payment will still be manageable. This is good news for the people who are trying to sell their homes or even borrow money with the equity that they have in their home. There is a risk with the inflation of the home prices. A great many of people will find out that they are not able to afford the homes that they have chosen to live in. Others will become too dependant on the home equity loans that they receive four offers for in the mailbox every day.
Homebuilders are in a good spot right now because of the inflation of home prices. One problem that they have to watch out for is that the floor will fall out of the rates at some point. This will slow the home building business down, and the home prices will drop. Hopefully, home building organizations will have planned far enough in advance to make sure that this does not become detrimental to their company.
The home building industry has become a highly successful industry in recent years and has had a positive impact on the GDP in our country over recent years. If interest rates begin to climb in the near future, this could definitely impact the home building industry. Prospective home buyers may not be able to qualify at higher rates, and the higher rates could even push current homeowners out of their homes. Macroeconomics has had a great impact on home building over the years and will continue to do so for years to come. If interest rates remain low, home builders could make economic decisions to continue building more homes, but if they rise, they should scale back. ?Businesses in the United States decide what to produce, how much to produce, and for whom to produce it. They make these central economic decisions on the basis of their own feelings, which are influenced by market incentives.? (University of Phoenix, 2004)
An economic indicator as defined by dictionary.com is, ?A variable such as the unemployment rate or volume of help-wanted advertising that indicates the direction of the economy.? (http://dictionary.reference.com/) There are several macroeconomic indicators that affect the home building industry. These include: interest rate, housing starts, personal income, inflation, Gross Domestic Product, and the unemployment rate. It is important to define these economic indicators as well as describe their current status and effect on the home building industry. Since indicators are measurements of economic activity, it is vital to express them in quantitative terms. In order to illustrate a historic trend for each indicator, it is also essential to present the effect of economic indicators on the home building industry through graphs.
Interest Rate & Housing Starts
One aspect of the current 2005 housing market that has served to make housing more affordable, even to the point of many industry analysts speculating that there is a real estate ?bubble,? is the relatively low rate of interest for home mortgage loans, and the lower interest rates in general that have been adopted by the Federal Reserve to spur the formerly sluggish American economy after the recession of 2001 into its currently more robust state. (Isidore, 2005)
The lower the rate of interest, the more incentive there is for the consumer to borrow money to purchase a house. Lower interest rates in general also make it easier for consumers to purchase furniture, cars, and the other necessary accoutrements of a middle class suburban lifestyle surrounding home-ownership. (Inman, 2005)
?Lower-than-expected mortgage interest rates? pushed home sales to a fifth consecutive record in 2005, the National Association of Realtors reported to Real Estate News at the beginning of 2005. This means that mortgage rates are likely to remain fairly tame, and point to the long-term prospect of interest rates on home mortgages that will be attractive and within the immediate reach of many homebuyers of modest means, despite fears that such a rosy prospect cannot last forever. Favored lender Freddie Mac reported the 30-year fixed rate dropped to 5.62 percent, a recent, record low for mortgage rates. (Inman, 2005)
Overall, all economic signs seem to point to continued low rates of interest. ?Will low mortgage rates remain around long enough to keep housing prices inflated? (Isidore, 2005)
All of these stable figures, combined with low inflation, point to the likelihood that interest rates and mortgage rates will remain steady, and thus the housing market is likely to remain attractive for buyers rather than sellers. ?Low inflation expectations have kept long-term rates low even as the Fed has raised its target for the federal funds rate, an overnight bank lending rate, eight straight times, to three percent from one percent. (Isidore, 2005)
Personal Income & Inflation
Inflation is a large concern for everyone involved, or planning to become involved with the housing market. People are willing to pay a lot higher than the ?sticker price? for new homes. That is one reason why the home building industry in the US is booming. Home buyers have caused a large increase in inflation for new homes. This has had a positive impact on the home building industry, but there are some disadvantages that home buyers need to watch out for. There is a risk with the inflation of the home prices. A lot of people will find out that they are not able to afford the homes that they have chosen to live in once the market falls or levels off. Hopefully, home building organizations have examined historic trends and will plan for the future incase inflation doesn?t continue and the market price for homes falls.
There are statistics that back up the fact that there has been a change not only in the inflation of home prices but also the amount of money that people are making. For example, the average price of a home in the San Francisco Bay Area in 1980 was around $275,000. Now the average price for a home in that same area is a staggering amount of just under $600,000. Also in that same time frame there has been considerable changes in the amount of money that people are making. In San Francisco in 1980 the average person made about $15,000 per year. Now people are making approximately $55,000 per year. This means that the average price per home has been multiplied by about 2.18. The average income has been multiplied by 3.66 in that same time period. (http://www.bluewealth.com/statistics/index.html)
Gross Domestic Product & Unemployment Rate
?The Gross Domestic Product (GDP) is the total market value of all final goods and services produced in an economy in a one-year period.? (University of Phoenix, 2004) The home building industry contributes to the GDP in that the home building industry is one of only a few industries that are growing upward. In May, 2005, Toll Brothers Incorporated, a large home building organization, reported a growth of 3.5% higher than previously forecasted, after the company reported doubling its profits in the first quarter. In addition, new home sales and existing home sales have also shown an increase in recent years. Though the growth is expected to slow by the end of 2005 the industry has extended the expected quarterly profits. Toll Brothers Incorporated saw a 3.5% increase in the value of its stocks.
New construction has increased over the past 10 years and the unemployment rate in the construction industry has decreased as a result. In 2004 the construction industry reported 828 extended mass layoffs. (NAICS 23: Construction) In 1995 there were approximately 4,113,000 production workers. That number has increased to about 5,330,000 in 2004. The construction industry has seen a growth when other industries are struggling. By the end of 2005 this industry will experience a slow down in production. Currently, the construction industry employs approximately 29% of the total employment in the goods producing sector. (NAICS 23: Construction)
Conclusion
When studying the effect that economic indicators have on the home building industry, it is important to examine the historic trend for each indicator. When studying the effects that the interest rate, housing starts, personal income, inflation, GDP, and unemployment rate, it can be determined that trends have changed over time and will continue to evolve as years go by. By focusing on the economic indicators, we can use the historic trends to help predict what will happen in the future with the home building industry. It is especially important because of the recent growth in cities across the US and also the recent inflation of home prices.
Economic Indicator Forecast Paper
Economic indicators can be used to help forecast future trends in many areas of economics in the US. Team B researched six economic indicators for the home building industry. These include: housing starts, interest rates, inflation, personal income, GDP, and unemployment rate. These six indicators can be used to forecast the future home building projections. It is important to analyze forecasts to better predict what will happen in the future throughout many industries. The team will look at the difference between two forecasts for the six indicators and point out which seem to be most accurate.
Housing Starts and Interest rates
Two of the most relied upon economic indicators are housing starts and interest rates, and the two are generally seen as related. High interest rates mitigate against capital outlay for housing starts or major purchases, for instance. Housing is perceived as more affordable when there is a relatively low rate of interest for home mortgage loans, and the lower interest rates in general that have been adopted by the Federal Reserve to spur the formerly sluggish American economy after the recession of 2001 into its currently more robust state (Isidore, 2005).
The lower the rate of interest, the more incentive there is for the consumer to borrow money to purchase a house. Recent statistics show likelihood for the continuation of low interest rates. The Federal Reserve is thus thought likely to hold interest rates fairly steady. However, what this might mean for housing starts and home sales is not certain.
Will low mortgage rates remain around long enough to keep housing prices inflated? The PCA (Portland Cement Association) forecast through 2006 is for steady interest rates, notably in terms of long-term interest rates, such as 30-year fixed conventional mortgage rates, expected to rise on a sustained basis through the second half of 2005 and into 2006. The increase in housing starts to date has helped drive the economy. Housing starts to date have been driven by tax cuts and lower interest rates. Even without a change in interest rates, growth cannot be sustained because population growth has slowed in many states even as home construction has continued to rise. There are already 23 states adding homes at a rate that is 30 % higher than need. So if homes fail to continue gaining value at the current rate, homeowners will be less likely to sell their present home and buy a new one, which will result in less existing homes available for first-time buyers (UCLA forecast predicts slowdown for housing sector, 2005, para. 8).
Thus, while interest rates and housing starts are linked, there are other factors that can influence each and that might mean lower interests rates do not immediately produce higher housing starts.
Inflation and Personal Income
Forecasting is essential for the home building industry to do. They have to be able to analyze the financial situation that they are in and be able to translate that into what to expect in the future. There are trends in almost every part of economics that can help to make there predictions fairly accurate. There are forecasts for inflation that help to tell where the country is fairing on the topic. Inflation is very important to the economy and has to be monitored very carefully.
Forecasts.org looked into inflation and made their results known for the next 10 years. Over the next 18 months that are planning on another 1.45% increase this year followed by an increase of 3.90 percent in 2006. Inflation is on the rise which has the tendency to make home prices higher than normal. Inflation affects the industry by increasing prices while the interest rates are still making home ownership attractive. The U.S. census bureau had similar results.
Personal income is another very important topic. There are ways to look at the past and the current situations that the economy is facing to be able to forecast what incomes will be in the future. The team found very different results in the forecasts that were taken for South Carolina. One of the sources, moore.sc.edu, said that income would increase by six percent in the coming year while http://www.census.gov states that there would be a small decrease in the coming year. The team tends to believe the census bureau because they are a very reputable source. The census bureau will have the best most accurate information to work.
GDP & Unemployment rates
The Congressional Budget Office (CBO) is one of two forecasting sources used by Team B. The CBO satisfies the requirement of section 202(e) of the Congressional Budget Act of 1974. The CBO provides impartial analysis of the economy and makes no recommendation. The CBO consists of a panel of some 30 people or more that analyze the baseline spending projection.
The 18-month forecast states in the CBO that the panel of individuals feels the Nominal Gross Domestic Product in 2005 is $12,396,000 dollars and will increase to $13,059,000 dollars in 2006. The percentage rate of the Gross Domestic Product in 2005 is predicted to be 5.7 percent and is forecasted to drop slightly to 5.3 percent in 2006. The Real Gross Domestic Product Price Index is predicted to be 1.8 percent in 2005 and will decrease to 1.5 percent. The CBO also forecasted the Unemployment Rate to be 5.2 percent and not expected to change in 2006. The CBO forecasts reflect little change in the economy from 2005 to 2006. There is a limitation to this technique of using a panel of advisors in that there is always the risk of human error.
The second forecasting source used by the team was The Financial Forecast Center. (FFC) The FFC predicts the behavior of the economy by using technique called, Neutral Networks. This technique uses computer programs that locate patterns in data and calculate formulas without the risk of human error. Computers are not capable of bias therefore this technique is believed to be the more accurate way to forecast.
In 2005 the FFC predicts the Gross Domestic Product to be $10,150,000 dollars and will increase to $10,610,000 dollars in 2006. The Growth Rate percent in 2005 is predicted to be 2.80 percent and will increase to 3.50 percent in 2006. The Unemployment Rate is predicted to increase from 5.47 percent in 2005 to 5.62 percent in 2006. The team feels that the Neutral Networks Technique used by the Financial Forecasting Center is more accurate because it eliminates all possible risk of human error. The technique of using a panel of individuals as the Congressional Budget Office uses allows for human error and emotional biases.
Conclusion
It is important for the home building industry to understand that forecasting is not 100 percent accurate. Mistakes can be made, and forecasting can be inaccurate. The team feels that human error can also lead to mistakes when using the indicators to predict six months to a year out. Even the e-text agrees that these predictions can be imprecise. ?The government relies on large macroeconomic models and leading indicators to predict what the economy will be like six months or a year from now. As part of the input to these complex models, the government must predict economic factors that determine the size of the multiplier. These predictions are imprecise, so the forecasts are imprecise. Economic forecasting is still an art, not a science.? (University of Phoenix, 2004)

I need an essay on the recent housing market situation on US. Causes and effects of the boom and the bust on the US economy.......Please keep it simple.
The paper must include the following:
-Statement of Purpose
-Body
-Conclusion
-Opinion (1 page)

Thank you for your help

You are to write a 1-page paper. A Written Critique of the article below... and How It Applies to Financial Management. Do Not Use Outside Sources.

Entrepreneurs' unusual tactic: Buying up homes by hundreds

TRENTON, N.J. -- Many people agonize for months before deciding to buy a house. Jonas P. Lee is more decisive: He often buys several in a day.
This year, the 38-year-old Mr. Lee says he plans to buy more than 1,000 homes for Redbrick Partners LP, a New York firm he runs with the help of an MIT economist to invest in single-family rental property. What millions of mom-and-pop landlords do locally, Redbrick is trying to do on a grander scale.
Mr. Lee, a former Web entrepreneur who grew up in New York's posh Westchester County, doesn't see much value in most suburbs at today's lofty prices. Instead, he is buying in working-class neighborhoods in such cities as Baltimore, Philadelphia and Trenton. Even there, however, he is running into tough competition from people determined to cash in on America's decade-long housing boom.
On average, house prices in the U.S. have jumped 85 percent over the past decade, according to the Office of Federal Housing Enterprise Oversight. Prices have soared largely because low interest rates have cut the cost of financing a home. In coastal areas, the rise has been far steeper. In California, for example, prices have more than doubled in just the past five years.
Mr. Lee's venture is an unusual sign of the investment frenzy now surrounding residential real estate. The National Association of Realtors estimates that 23 percent of home purchases last year involved investment properties. Redbrick's pitch is that investors can join this gold rush without the ordeals of being a landlord.
Many real-estate investment trusts and other funds invest in apartment buildings. But the complications of owning hundreds of single-family homes are so daunting that large real-estate companies generally shun that market.
One of Mr. Lee's tactics is to find a landlord who owns 20 or 30 houses and has been worn down by the trials of collecting rent and fixing leaky toilets. Redbrick then can buy homes in bulk and hire local managers to take care of the properties. He also uses a formula created by his economist partners to identify markets -- usually low-profile working-class neighborhoods -- that have undervalued homes with potential for high rents.
Redbrick's first fund, which started with $3 million of equity and has used borrowings to acquire about $10 million of properties, has produced an estimated return of 50 percent after fees since closing to new investors in December 2003, Mr. Lee says. Redbrick has told investors in its first two funds that it expects average annual returns in the 18 percent range.
Formed three years ago by Mr. Lee and a partner, Redbrick's two funds have now raised about $16 million of equity, primarily from individuals. So far, the firm has bought more than 500 homes in the Northeast.
One recent morning, Mr. Lee spent about five minutes touring a four-bedroom row house on Hewitt Street in Trenton. He noted pipes that needed insulation, a sloping bathroom floor and a basement strewn with cotton swabs and other rubbish.
"You didn't do much work here," Mr. Lee told the owner, Glenn Kramsky, who specializes in buying houses to fix up and sell quickly.
"We did a lot of work," Mr. Kramsky said. "It was nasty."
A few days later, Mr. Lee agreed to buy the house, and four others nearby, from Mr. Kramsky for an average of about $75,000 each. He figures he can find tenants for them paying between $800 and $1,200 a month and eventually sell the homes at a profit.
To choose its markets, Redbrick is turning to economic models. One of Mr. Lee's partners is William Wheaton, an economics professor at the Massachusetts Institute of Technology and former director of the MIT Center for Real Estate. Dr. Wheaton crunches numbers on local economies and housing markets. The firm also has studied the costs of being a landlord, including vacancies, bad debt and management time. Most "amateur" landlords, Mr. Lee says, fail to factor in all their costs and "just don't know what they're doing."
Still, no amount of science can take the unpredictability out of being a landlord. Last year, pipes burst in eight of Redbrick's houses during a cold snap in Trenton. A house Mr. Lee thought would require about $5,000 of work has so far soaked up $11,000, including a new sewer line and 18 window screens demanded by a housing inspector.
One of the biggest challenges is deciding when to believe the tenants' excuses. One tenant told Redbrick she couldn't pay her rent because she had just been diagnosed with cancer. Another said his mother had just died in a car crash. Both stories proved untrue, Mr. Lee says. Then there was the tenant who shot his girlfriend to death in a Redbrick home. One of the company's employees had to wipe the blood off the walls.
Stephen DeNardo, chief executive of RiverOak Investment Corp., of Stamford, Conn., agreed to invest $2 million in a Redbrick fund last year, after spending several hours with the founders and touring some of their rental homes. "I think it's a hard business," Mr. DeNardo says, but "they have a good handle on where to invest and where to stay away from." RiverOak manages a $25 million real-estate fund, mostly invested in office buildings, apartments buildings and industrial property.
Others are dubious about the prospects for turning the tricky, local business of being a family's landlord into a national enterprise. Some have tried similar notions, with less-than-encouraging results.
In the early 1980s, Equity Programs Investment Corp., or Epic, owned by a now-defunct Maryland thrift, managed more than 300 investment partnerships that controlled about 20,000 homes, mostly bought from builders. Epic defaulted on more than $1 billion of mortgages in 1985 and collapsed.
More recently, some real-estate executives have considered investing in single-family housing and concluded it would be too difficult to return a decent profit. Among them is Richard J. Campo, chief executive officer of Camden Property Trust, a Houston-based real-estate investment trust which owns large apartment buildings. He says it would be far more costly to lease and maintain houses scattered over a wide area than it is to deal with large numbers of apartments in a single building.
Mr. Campo also says it would be hard for a large company, with overhead and the need to provide attractive returns to investors, to compete with small operators who dominate single-family rentals. "Mom and pop have very low overhead," he says, partly because they often can fix a door handle themselves rather than hire an expensive professional.
Other companies have found different ways to play the single-family housing market. Hearthstone Inc., an investment company in San Rafael, Calif., invests alongside builders in large developments of new homes, putting between $20 million and $50 million into a typical project. Buying homes that are already built and occupied would be hard to do on the scale needed by institutional investors, says James Pugash, chief executive of Hearthstone.
Redbrick says people who rent houses tend to have children and so usually are more settled than apartment dwellers. That means the house renters are likely to remain tenants longer, reducing the costs of finding new tenants, the company says.
Mr. Lee, who earned a masters degree from Harvard Business School in 1993, moved into real estate after leaving his previous start-up, a Web site that sells gift certificates. Real estate attracted him partly because of his experience as owner of a home in a converted Manhattan industrial building. He bought the co-op home in 1999 for $176,000, made improvements and recently had it appraised at more than $1 million. His investments in stock and bond funds never seemed to do as well.
He teamed up with Tom Skinner, a former McKinsey & Co. consultant with a doctorate in economics from MIT. At first, they thought they should concentrate on finding towns wih the best potential for house-price gains. But, working with the models of Dr. Wheaton, the MIT professor, they concluded home prices had risen so fast in much of the U.S. that it would be too risky to focus heavily on appreciation.
They found an analogy in the stock market: At the beginning of a bull market, it often makes sense to buy growth stocks, ones with rapidly rising earnings. But if the market looks expensive and could be heading for a dip, many investors prefer stocks with high dividend yields, which promise steady income. The housing equivalent of dividends is rent.
They decided to look for strong rental markets. Redbrick calculates what it calls "rental yield," defined as the annual rent, minus all costs borne by the landlord, divided by the value of the house. In prosperous suburbs, Mr. Lee says, the yield would be about 3 percent or 4 percent, because rents are low in relation to home prices in such areas. In thriving working-class neighborhoods, though, yields can reach 6 percent or more, he says, because rents there are high compared with home prices.
The higher yield can be a "signal of mispricing," meaning the homes are a bargain and eventually will appreciate, Mr. Lee says.
Dr. Wheaton, who is a partner in Redbrick, uses data from the Office of Federal Housing Enterprise Oversight and the Census Bureau to find out where average rents are high relative to house prices. He studies economic data to find cities where job and income growth is likely to be healthy. He also looks at supply, steering clear of Texas, for instance, because "they build houses like rabbits multiply."
Choosing the right city isn't enough. In urban areas, one blighted block may be recovering while the next is a refuge for drug dealers. Redbrick has hired local property managers in several cities to oversee its units and help figure out which neighborhoods are the best bets.
Much of the challenge lies in estimating how much improvement a house will need and how much rent it will bring in. In the basement of the house in Trenton, Michael Davis, Redbrick's local property manager, points to a tangle of pipes. "These will be bursting at some point," he says, unless insulation is applied. In the bathroom, he opens a window only to see it slam back down. Mr. Lee makes a few notes and estimates the house needs $5,000 of work, including a bathroom makeover. The rent, he figures, should be around $1,050 to $1,100 a month.
The next neighborhood they view seems rougher. One house bears a sign reading "Beware of Pit Bull." Two doors down, they tour an unoccupied house where the refrigerator lies on its side in the middle of a pink kitchen spattered with grease. In the attic, they find water damage and crumbling bricks. "This is a gut rehab," Mr. Lee says, crossing it off his list.
Some properties can be ruled out immediately. Standing in front of one Trenton row house, Mr. Davis points to the front porch floor and says: "Got a little slant going there."
"Little!" Mr. Lee says. "Forty-five degrees."
When houses for sale come with tenants, Messrs. Lee and Davis try to size them up quickly, too. Mr. Davis says there are some obvious signs of a good tenant: "There's not food in the corner. There's not bugs crawling all over the walls, and there's not a hole in the wall that wasn't there before."

The structure should be the following.
1. Introduction. Naming the specific details of the current crisis which distinguishes it from the dotcom boom and the previous financial meltdowns. Theoretical part. Classic works of Minsky, Krugman. Critics. New approaches.
2. Technical description of a housing market. Securitization. CDOs. What made the crisis happen.
3. Description of the crisis. From the early warnings down to may 2008.
4. Spillover effect. Problems inside the EU banking system.

Please do not put in essay format, keep in seperate question format

Chapter 11: Mortgage Loans
Chapter 11's primary focus is the financial aspects of the real estate transaction. And, as we are painfully aware, the mortgage industry and its related lending practices led to an exceptionally serious and damaging economic crisis (2008-2009) in the housing industry that had a huge ripple effect throughout the US Economy. This chapter highlights the fact that the vast majority of mortgage loans are 30 year, fixed rate loans. Discuss the pros and cons of a 30 year, fixed rate loan. In addition, should Congress and state legislatures more closely monitor and regulate the mortgage industry in light of the mortgage collapse of the last 2+ years?



Chapter 13: Fannie Mae and Freddie Mac
Many economists link the 2008-2009 mortgage crisis and housing market slump to Fannie Mae and Freddie Mac lending practices that started in the mid 2000s. Others linked the crisis to inadequate oversight by federal regulators. And, still others attempted to connect this crisis to federal legislation passed under the Clinton Administration that aggressively promoted low income loans. Comment and justify your comments. Furthermore, there has been increasing level of political debate that Frannie and Freddie should be abolished. What are your thoughts?

Chapter 14: ARMs and other Creative Mortgages
During the past 5 years or so, the mortgage industry, in partial response to escalating housing prices, developed a number of financing instruments (3 and 5 year renewable ARMs, 80/20 loans, stated income loans, NINJA loans) to enable home buyers to purchase a home with initial low down payment and low early years monthly payments. The 2008-2009 mortgage crises proved that strategy to be foolhardy and clearly put the US Economy at serious risk of collapse. Overly creative mortgages have proven the adage of "no free lunch". Do you agree or disagree? Justify. Should there be limitations placed by Congress and state legislatures on the use of ARMs and other creative mortgage schemes.

Write an 8-10 page paper on a topic of your choice that focuses on one of the stimulus/recovery packages passed or proposed (ie., economic stimulus, housing bailout). You should give an overview of the economic environment in which we are currently operating and briefly discuss how we got to this point. This overview should be a concise summary and be no longer than 2 pages. (If you choose later to focus on the economic stimulus package, this overview could be very broad. If you choose something more specific such as the foreclosure package, you might want to focus your overview on the housing market only.) You should describe the package (or piece of package if you would like to focus instead on one component only) and the way in which legislators/regulators intend this package to stimulate the economy (or a specific sector of the market/economy that are the intended effects of the package (both short-term and long-term) on things like GDP, inflation, and interest rates? In this discussion, you should address the changes that we would need to see in the economy in order for the stimulus package to have its intended effect and also things that might cause problems with the package and ultimately lead to less than optimal results. As a final part to this discussion, please include your opinion on how you think the package you discuss will impact the economy and what you foresee as some important areas that changes need to be made to lead to a quicker recovery. The discussion surrounding your opinion should be at least 2 pages of the final paper. You must cite sources and include a works cited page also. The final opinion section should be your opinion and should not use cites.

Hello, below is the topic for this essay, and it would be really helpful if you could find some data from FED or WORLDBANK that could back up the opinion. Please let me know if you have any questions, thank you!

This semester we have explored a variety of perspectives on macroeconomics and considered the logic and evidence that helps to distinguish them from each other. This discussion has taken place in the context of the most significant slowdown in U.S. macroeconomic activity that has occurred in the past 70 years. Your assignment is to write an essay that analyzes the sources of the current economic crisis, its implications for the future, and how the future path of the economy could be affected by various policy choices.
*** I encourage you to consider the following broad questions as you organize your thinking:
What is the source of the current economic crisis? (Hint: Consider consumer spending, the housing market, and household debt. You can certainly discuss other sources, but do not ignore the household finance issue.)
Link your analysis of what has happened to the main theoretical perspectives that we have covered in class. While you may choose to emphasize a subset of the theoretical ideas as the most helpful in explaining current events, try to compare different approaches. Discuss how aspects of different theories are (or are not) helpful in explaining current events. Also, your grade will be better if you can build a somewhat nuanced story that demonstrates a deep understanding of the theories. For example, in discussing Keynesian perspectives, consider the difference between short-run and long-run outcomes and how that difference depends on the role of price adjustment or monetary policy.
How does your understanding of the Great Recession inform you about U.S. economic experience over the next few years? Any forecast is necessarily somewhat speculative, but I encourage you to link your analysis of what has happened to possible future outcomes. Will recovery proceed? How quickly? What factors will determine the future path of the economy?
Consider the role of fiscal and monetary policy both in explaining what has happened and what we can expect in the coming years. Also think about policies or institutional changes that might go beyond typical monetary and fiscal stabilization policy. Be careful to link your policy discussion in a consistent way to the theoretical analysis that you develop in your essay.
?
What evidence can you point to that helps distinguish between various explanations and policy recommendations?
You have received a number of readings that discuss aspects of the current economic crisis (everything is posted on the course web site). You should use these readings to help guide your thinking about the essay. Try to use quotations from the readings to illustrate and support the points that you make. Your paper will likely draw primarily on analysis that we have covered in class. While you may use outside sources about the current U.S. economy if you find them helpful, it is not necessary to do outside research that goes beyond the class discussions and readings.

Make every effort to show that your personal writing style has achieved clarity, and hopefully even some grace.1 This ambitious objective for this assignment suggests that you will need to write a first draft and revise it, hopefully multiple times, over a rather extended period. While material we talk about in the final few weeks of the class will be relevant for this assignment, you have everything you need to begin work on it immediately.
There are faxes for this order.

Given that you are single with no childern and have an annual income of 30,000 before taxes. Make a personal decision in a form of an essay on whether it is economically feasible to buy or rent now in the prevailing housing market.

Please consider the following when writing:
Down payment, Debt service-interest rate, Discount points, Local tax costs, insurance, closing costs, tax shelter, inflation and property appreciation, location-land values, transpotation costs, convenience, tenure choice and rent contract.

Questions that this essay should answer:
1. What are the characteristics of homeowners as compared with renters?
2. What are the actual costs of home ownership?
3. Who can afford it?
4. What are the real reasons for homeownership?

THESE ARE THE TWO ARTICLES ASSIGNED TO ANSWER THE QUESTIONS.
Flaherty Comfortable Business Will Replace Stimulus
October 23, 2010, 9:04 AM EDT
Oct. 23 (Bloomberg) -- Canadian Finance Minister Jim Flaherty said he is comfortable that an increase in business investment will allow his government to end its stimulus measures in March as planned.
Speaking in a Bloomberg interview, Flaherty, 60, said he has seen an increase in investment, particularly in machinery and equipment since the second quarter of the year. Weve helped stimulate that with tax breaks.
The Bank of Canada lowered its economic growth forecasts on Oct. 20, and Flaherty has faced increasing political pressure to extend some fiscal stimulus measures past their March 31 deadline.
Im comfortable where we are, Flaherty said. We see increasingly the private sector moving in to provide the demand that the public sector has been providing with peoples tax dollars.
The central bank cut its estimate of economic growth for this year to 3 percent from 3.5 percent, and for 2011 to 2.3 percent from 2.9 percent. The expansion will shift from being driven by consumer and government spending to exports and business investment, the bank said in its monetary policy report.
Canada last week joined central banks in Brazil, Malaysia and Australia in keeping rates unchanged to gauge the global recovery and avoiding a divergence with the Federal Reserve and the European Central Bank, where policy makers have signaled they may offer additional stimulus.
Exports a Weakness
Shipments abroad are clearly a weakness in our economy, our exports to the United States in particular, Flaherty said. We always wish the Americans well in their recovery.
Flaherty contrasted his governments effective stimulus measures with those in the U.S., where economic data suggest the stimulus has had less of an impact. The U.S. has its own challenges, Flaherty said, including a weaker economy and higher unemployment and still a terrible situation in their housing market.
A successful U.S. recovery is important for Canada and the rest of the world, he said. As much as we talk about the emerging economies, the largest economy in the world remains the United States, he said.
Relying on U.S.
Canada relies on the U.S. for 63 percent of its trade, and the countrys dollar reached parity with its U.S. counterpart last week for the first time since April. U.S. Fed Chairman Ben S. Bernanke said Oct. 15 that new stimulus may be warranted because inflation is too low and unemployment is too high.
That could put fresh pressure on exporters hurt in the global recession by lost U.S. orders of manufactured goods such as autos and paper.
Flaherty said this weekends talks had gone some way to reducing worries that the global economy could be hurt by currency and trade tensions. Im modestly less concerned, but Im still concerned, he said. We made some progress this weekend but theres more hard work to do before G-20 leaders meet in Seoul next month.
We certainly see the relative inflexibility of certain Asian currencies, which remains a serious issue, Flaherty said. I hope well see movement there as a result of the discussions this week.
--Editors: Brett Miller, Ken McCallum
Source: Business Week
http://www.businessweek.com/news/2010-10-23/flaherty-comfortable-business-will-replace-stimulus.html

Canadian finance ministers to target debts and deficits in new year
KAREN HOWLETT and BILL CURRY
Kananaskis, Alta.?" From Tuesday's Globe and Mail
Published Tuesday, Dec. 21, 2010 12:16AM EST
Last updated Tuesday, Dec. 21, 2010 8:39AM EST
Canada will enter 2011 on a different path to economic recovery from the United States, trading stimulus spending for a renewed focus on debts and deficits.
Finance ministers pledged on Monday to insulate the country from further global economic shocks by making deficit and debt reduction a top priority, although their unity was less certain on the subject of whether Ottawa or Ontarios fiscal picture is of greatest concern.

Federal Finance Minister Jim Flaherty said Canada needs to get back on the strong financial footing that helped it weather the global economic recession better than many other countries. What he is seeking to avoid is the spectre of the debt crisis that is gripping many European Union countries.
The situation remains fragile, with concern over mounting public debt in many countries and its implications for long-term growth, Mr. Flaherty said at a news conference in Kananaskis, Alta., after his day-long meeting with provincial and territorial finance ministers.
But he sought to strike a more conciliatory tone with Ontario by backing off his calls last week for all the provinces to balance their books by 2015. Now, there is no firm date, just a commitment to shed red ink in the medium term, he said.
Were all on track.
Ontario is projecting a deficit of $18.7-billion for fiscal 2010-11 and does not expect to balance its books until 2018.
Well see who gets to balance first, Ontario Finance Minister Dwight Duncan told reporters.
He noted that Mr. Flaherty has continually understated the size of the federal deficit ?" pegged at $55.6-billion for 2009-10 ?" and said his federal counterpart should do a better job of getting his own affairs in order before telling others how to manage theirs.
But Mr. Duncan is alone on this front. Virtually every other province expects to erase its red ink by 2015, and Saskatchewan and Newfoundland and Labrador are on track to post surpluses in the current fiscal year.
Bank of Canada Governor Mark Carney, who was also at the Rocky Mountain resort for the meeting, reinforced the importance of addressing debt and deficits, Alberta Finance Minister Ted Morton said.
Im not going to be a fear monger, but I think when both the Governor of the Bank of Canada and the Finance Minister say this is an important issue, everybody should listen, Mr. Morton told reporters.
He himself expressed concerns that Ontario, which accounts for 40 per cent of the Canadian economy, could drag down the entire country and said Canada could head in the same direction as the European Union.
Douglas Porter, deputy chief economist of Bank of Montreal, does not share that view. He questioned the urgency of imposing a new era of spending restraints just as the United States embarks on a stimulus plan to help its ailing economy.
With fiscal policy diverging between Canada and its largest trading partner, Mr. Porter said, the United States will likely see stronger economic growth, at least in the short term, than this country.
No country wants to be anywhere close to where countries like Ireland or Greece or even Spain or Portugal have found themselves, Mr. Porter said. But, frankly, I dont think Canadas in the same hemisphere.


THESE ARE THE ARTICLES I AM SUPPOSED TO USE TO ANSWER THE QUESTIONS BELOW.
QUESTION 2
How does Canadas Federal system affect economic policy in the recovery?
In answering this question, you might consider the following (though you should NOT treat them as a series of short answer questions):
What is the most important economic priority for Jim Flaherty, the Federal Minister of Finance? Why is it important to him?
What is the most important economic priority for Dwight Duncan, the Minister of Finance for Ontario? Why is it important to him?
How might Flahertys policies increase Canadian competitiveness? How might Duncans policies increase Ontarios competitiveness?
What are the advantages to having different economic policies at the Provincial and Federal level? Disadvantages?

QUESTION 3.
Choose a non-government business in Ontario that you know well. Evaluate the policies you have discussed above in light of their impact on this business.
Which economic policies are more likely to impede their recovery? Why?
Which economic policies are more likely to support their success in recovering from the recession?


*I NEED A MINIMUM OF 6 QUOTATIONS AND 3 CITATION SOURCES. IN ADDITION I NEED EAC QUESTION ANSWERED TO BE NUMBERED. THANK YOU!


There are faxes for this order.

Inorder to work on this assignment the writer must use below info to access the [email protected]
Login to the SBS intranet using nkb06122 password shar959D. Go to course information/click Finance and Financial Management then Assignment. Click international to use the Assignment Return Datasheet and the FFM Portfolio calculations

The question below is estimated to an answer carrying 3000 words


Master of Business Administration

International


MANAGING FINANCIAL RESOURCES
(Finance & Financial Management)

ASSIGNMENT

October 2008 September 2009





The questions in this assignment require some quantitative work and some interpretation. When answering the discursive questions make full use of the relevant theoretical propositions and concepts.

Question 1: Capital Expenditure Decisions and Investment Criteria

Ammanford Plc

As the finance director of Ammanford Plc you have been asked to evaluate an investment proposal relating to the manufacture of a new product. The companys Research and Development Department has been working on this product for quite some time and has already spent 2.00m on its development and it will be necessary to spend a further 500,000 to complete the work. Management is confident that it will be able to launch the product successfully quite quickly without spending more than the planned amount.

The selling price for the product is expected to be set at 18.00 per unit and it is anticipated that sales in the first year will be about 300,000 units, rising to 400,000 in year two, and sales are expected to remain at this level for the following four years. It is anticipated that the product will no longer be competitive after six years and it will be withdrawn from the market.

To manufacture the product an investment of 12 million will be necessary in new production facilities. This expenditure can be written off (capital allowances) for tax purposes on a straight-line basis over the products six year life. The re-sale value of the equipment has been estimated to be about 0.80 million at the end of the six years. Use will also be made of some equipment the company already owns. This equipment is fully depreciated for tax purposes but could be sold today for 0.45 million. If used in the manufacture of the product it is not expected to have any value at the end of the six year period. The production facility will be located in one of the companys factories that is not being fully utilised. The company has no alternative uses available for this space, but it could be rented out to another manufacturer who is short of space for 80,000 per annum. The product will be charged 50,000 per annum for the space it utilises through the companys management accounting system. The fixed costs associated with the production are expected to be 750,000 per annum. Each product sold by the company is also allocated by the companys accountant an overhead charge of 10 per cent of the revenues it generates to cover head office expenses. The direct manufacturing costs are expected to be 6 per unit. The company will need to hold stocks of the finished product at the start of each year equivalent in value to 20 per cent of the sales expected in the next year. It is also planned to hold 10 per cent of the materials required for production in the following year. The increase in debtors as a result of introducing the product will be offset by the increase in creditors. The company requires a rate of return of 14 per cent on investments of this nature, and the tax rate is 30 per cent.

a) Determine the investments net present value, the internal rate of return and payback period and carefully interpret your results. All key assumptions should be specified and explained.
(15 marks)

b) Explain what is meant by sensitivity analysis, use sensitivity analysis to identify the critical determinants of the NPV of the proposed investment, and interpret your results.
(10 marks)
(TOTAL 25 MARKS)
Question 2: Price-Earnings Ratios

a) Explain what is meant by a price earnings ratio and utilise a valuation model to identify the theoretical determinants of these ratios.
(10 marks)

b) Take a sample of four companies quoted on a stock exchange and obtain estimates of their price earnings ratios for a particular day. Discuss the factors that might account for the differences in the reported price earnings ratios of the companies you have chosen.
(10 marks)
(TOTAL 20 MARKS)


Question 3: Rights Issues
The Royal Bank of Scotland (RBS), the second bank in the UK at the time, announced a rights issue to raise 12 billion on April 22nd. There was considerable coverage of the issue, the largest UK equity issue, in the financial press.

The following contains extracts from the report on the issue released on the internet by the BBC.

Royal Bank of Scotland (RBS), the UK's second-biggest banking group, is asking shareholders for an extra 12bn to shore up its finances.

The rights issue was announced as part of a trading update and is one of the largest seen in UK corporate history.

The firm also announced a write-down of 5.9bn before tax, following its exposure to the credit markets.

BBC business editor Robert Peston said other banks may well follow suit, to reinforce their financial foundations. Mr Peston also said RBS would "retain more capital in its balance sheet to meet the risks of default by borrowers than it had been doing".
Market conditions

RBS, which played a leading role in last year's takeover of the Dutch bank ABN Amro, said it needed to increase its cash base and a rights issue was the best option. In its latest update, which covered the period from 31 December to 22 April 2008, RBS said global banking and markets had been "acutely affected by credit market conditions" especially in March.

RBS said it may sell assets to raise funds, which could net it around 4bn. It is reviewing its insurance arm, which includes Churchill and Direct Line among others.

The bank said it had seen a "severe and increasing deterioration in credit market conditions, the worsening economic outlook and the increased likelihood that credit markets would remain difficult for some time".

"The rights issue deals with concerns over the balance sheet," said David Cumming, head of UK equities at Standard Life Investments, which holds a 3.5% stake in RBS. The rights issue enables the bank to add to its reserves - which were hit following the ABN Amro deal, with some analysts now arguing it paid too high a price for the Dutch bank.

When the deal was sealed at the end of 2007, many banks hoped market conditions would improve in 2008. Since then, however, the impact of problems in the US housing sector has worsened not improved. And what were viewed as problems of a particular sector - the housing market and specifically risky borrowers known as sub-prime customers - have had a wider economic impact.
Under the terms of the rights issue, 11 new shares will be issued for every existing 18 shares at 200 pence each.

The rights issue value is 46% less than Monday's closing share price of 372.5p. RBS shares ended Tuesday down 3.89% at 358p.

The reaction in the press to the issue were mixed. The following extract from a financial times article reported the views of stockbrokers on the issue

RBS rights issue is a 'no-brainer', By Matthew Vincent
Published: April 26 2008 03:00 | Last updated: April 26 2008 03:00

Under the terms of the fundraising, shareholders will be offered 11 new shares for every 18 held, at an issue price of 200p - a 43 per cent discount to yesterday's closing price. Analysts suggest this represents good value on fundamental grounds.

Alex Potter of Collins Stewart says: "I certainly think people should take up the rights. They get the benefit of the discount, avoid dilution and, post-disposal and rights issue, the stock is not looking that expensive." Taking his 2009 earnings per share forecast of 37p, the shares currently trade on a forward multiple of9. But Potter argues: "If you're buying shares at 200p, it's incredibly cheap."

Richard Hunter of Hargreaves Lansdown says that for anyone who was considering investing in RBS anyway, the rights issue is "a no-brainer", although the firm takes a neutral view of the stock. He suggests that investors should adopt a "tail swallowing" approach - selling some of the rights in the market to cover the cost of taking up rights on the rest.
Various aspects of the RBS rights issue were discussed in the press: among these was the level of the underwriting fees for the issue. The prospectus indicated that the cost of the issue to RBS was about 246 million, of which 210 million stemmed from underwriting and sub-underwriting fees.

The Under-writing of the RBS Rights Issue

In an article in the Financial Times on May 29 Kate Burgess, Banks slated over rights issue bonuses, discussed the under-writing fees associated with the RBS rights issue.

Leading UK investors have lashed out at investment banks for earning big bonuses from advising on rights issues at the expense of shareholders.

Keith Skeoch, chairman of the Association of British Insurers' investment committee and chief executive of Standard Life Investments, has warned today that investors will take a very dim view of boards allowing their investment bank advisers to bump up the costs of rights issues, and to earn big bonuses for doing so.

"In future . . . boards should expect institutional investors to focus increasingly on the marginal costs of rights issues so as to ensure that the marginal rewards accrue to the long-term risk-takers that facilitate systemic repair rather than to the bonus pots of investment bankers who helped to create the problem in the first place," he says.

UK shareholders point out that most banks leading a rights issue pass on much of the risk that an issue will be unsuccessful to investment institutions which act as sub-underwriters. Investors' concerns about rights issue fees have mounted after seven rights issues from European and UK banks since the start of the year, with many more expected.

Investment bankers counter that underwriting fees attached to the recent rights issues are lower than they have been in the past. At the same time, volatile markets mean the risk of being left with unwanted stock has risen, even when issues have been priced at a deep discount to the company's share price prior to the launch of a fundraising. Share prices of several of the banks that have recently launched deeply discounted issues are edging closer to the rights issue price. And while in the UK some of this risk is passed on to sub-underwriters, lead banks usually keep the majority, bankers say.

These concerns emerged recently when Royal Bank of Scotland announced Europe's biggest ever rights issue. RBS agreed with its lead banks that fees would be 1.75 per cent maximum. However, shareholders objected when the investment banks leading the issue then offered them 0.8 per cent of this fee for sub-underwriting - about half the amount shareholders might have expected in the past. The banks subsequently agreed to raise this sub-underwriting fee to 1 per cent after investors complained to RBS.
During the subscription period the price of RBSs shares fell quite significantly along with the shares of other financial institutions, but it remained above the exercise price and was deemed to be a successful issue.

The Outcome of the RBS rights issue

Royal Bank of Scotland completed its historic 12bn rights issue on Monday despite a fall in the banks shares last week.

The bank confirmed at the open on Monday that 95.11 per cent of the shares offered had been taken up by investors leaving a rump of nearly 300m shares with the underwriters Goldman Sachs, Merrill Lynch and UBS. Later in the session the remaining 299.4m shares were placed with investors on Monday at a price of 230p a share, raising an additional 688.6m.

The success of the issue the largest seen in European markets followed an upturn in the banks share price last week, which at the start of the week had fallen to 220p, dangerously close to the 200p price for the shares, offered to investors on an 11 for 18 basis. By Thursday night, though, the shares had recovered to 259p, ahead of the rights deadline on Friday. On Monday the shares fell 5 per cent to 231p.

Maggie Urry RBS completes 12bn rights issue. Financial Times June 9 2008

a) Determine the expected ex-rights price and the value of a right of the RBS issue at the time of announcement.
(7 marks)

b) Demonstrate that in principle a shareholder owning 900 shares will be equally well off from investing in the rights and selling the rights.
(7 marks)

c) Discuss the rationale for having the issue underwritten and comment on the costs of the underwriting.
(8 marks)

d) Critically evaluate the views of Alex Potter of Collins Stewart

"I certainly think people should take up the rights. They get the benefit of the discount, avoid dilution and, post-disposal and rights issue, the stock is not looking that expensive." Taking his 2009 earnings per share forecast of 37p, the shares currently trade on a forward multiple of 9. But Potter argues: "If you're buying shares at 200p, it's incredibly cheap.
(8 marks)
(TOTAL 30 MARKS)


Question 4


The file FFM Ass Oct 08 Ass Returns.xls will be found on the class website, it gives 50 months returns for 40 securities drawn from the FT ALL share index for the period. Choose any five securities at random and form an equally weighted portfolio of these securities

a) Determine the returns for the portfolio for each month in the period. On this basis determine the average monthly return for the portfolio and its standard deviation.
(5 marks)

b) Determine the average returns over the same period for each of the securities and their respective standard deviations. Using Excel derive the co-variances or correlation coefficient for each pair of securities. On the basis of this information and using portfolio equations, based on the average covariance and average variances calculate the standard deviation of the portfolio. Compare your results to those obtained in (a).
(5 marks)
(TOTAL 10 MARKS)


Question 5


Options Traded on Marks & Spencer Shares
Share Price Exercise Price Calls Puts
Sep Oct Nov Sep Oct Nov
210 205 12.0 24.0 27.0 6.0 17.5 19.5
210 9.5 21.5 24.5 8.5 20.0 22.0

a) Explain carefully why the November calls are trading at higher prices than the September calls.
(5 marks)

b) Draw a diagram illustrating a straddle, using calls and puts expiring in November and an exercise price of 210. Explain the circumstances in which an investor might consider it worthwhile to invest in a straddle.
(5 marks)

c) Comment on the contention that options are a zero sum game for the writer and investor in options.
(5 marks)
(TOTAL 15 MARKS)

Instructions - Answer the following 5 questions

Think about the approach your firm uses to assess the environment it competes in and undertake environmental scanning.

How does your firm evaluate its remote, industry, and operating business environments?

What are your firm?s strengths and weaknesses?

What opportunities, threats, and trends is your firm facing?

What is your firm?s competitive position in its industry today and in the future?

Evaluating the impact of the economy on your firm in the future is, as you have seen, an important component of this process.
What data and forecasts are readily available to you, and how would you acquire this data if it is not available?






Environmental Scanning: Remote and Industry

INTRODUCTION
You are responsible for developing a strategic plan for your firm. Firms, including yours, face a tough competitive environment. Planning for the future by completing detailed environmental assessments leads to smart decision making, often allowing the firm to seize a dominant position in the market because it has a better understanding of the future than its competitors. Examples of this type of detailed assessment leading to competitive advantages include the automaker who, by studying the economy and demographic trends, developed the minivan and as a result gained a significant advantage in that market. Another example is the developer that anticipated the recent strength of the housing market and demographic trends pointing towards the aging of the baby boomers and acquired a developer that is well known for the development of master-planned, age-restricted communities.

Effective environmental scanning positively influences business decision making because the evaluation of the remote, industry, and operating business environments provides a framework for successful planning. This form of assessment allows the firm to accurately evaluate its own strengths and weaknesses and assess the overall viability of its industry and its competitive position within the industry. In order to plan for the future, the firm will also have to evaluate the strength of the economy in the future and what it means for the firm.

AN EXAMPLE OF HOW AN ORGANIZATION HAS ACTUALLY USED THIS WEEK?S LEARNING OBJECTIVES
The developer identified previously purchased over 10,000 acres of land north of a large metropolitan area in the western part of the United States in the middle of the 1990s as part of a plan to prepare for an anticipated strong housing market in the first years of the new century. How did the firm arrive at this decision? First, the firm recognized its strength: the planning and development of large master-planned communities. A weakness the firm was confronting was the need to acquire large parcels of land to undertake the development of large master-planned communities. A real threat that the firm was facing was missing what it perceived would be the opportunity to successfully undertake large development projects. Finally, key opportunities and trends were apparent to it because of the results of its assessment of the remote environment.

It is this assessment of the remote environment that paved the way for this firm to succeed. The firm carefully analyzed population and demographic trends, economic forecasts related to the overall strength of the national and local economies, and interest rates. The firm, using the analyses of its staff and consultants, and data and forecasts readily available online (see the Implications for E-Business section) concluded that the time was right for this significant investment. The local and national economies were expected to be relatively strong during the next 10 to 15 years. Interest rates were expected to be relatively low. Population forecasts and demographic trends were positive, indicating expected population increases in the western part of the United States. This type of detailed analysis allowed the firm and this development to succeed in the future.

HINTS FOR A READING STRATEGY OF THE ASSIGNED MATERIALS
One again, as you start your reading assignment and learn about a new application of economics, part of your task is to become acclimated to the terminology and key concepts. The reading assignment this week helps you with that. As you read the material, you will find opportunities to apply your learning in this class to your workplace. The analysis of the impact of cultural diversity, demographic trends, supply and demand, macroeconomics, and international trade on your firm will facilitate the completion of an environmental scan that assists your firm with its strategic planning. Practically, what you will see with environmental scanning is the opportunity to apply your learning of economics to the analysis of a real-world problem, namely successfully planning for your business.

As you complete the reading and participate in the classroom discussions, think about how your firm completes its environmental scans to formulate sound business decisions. Identify areas for improvement and your participation in the planning process. The process of environmental scanning is important for all firms, small or large. The accurate assessment of the remote, industry, and business environments facilitates the decisions restaurateurs make regarding where they should open a restaurant, the developer discussed previously determining to purchase and develop a large parcel, and the multinational firm?s decisions regarding entering new markets.

IMPLICATIONS FOR THE GLOBAL ENVIRONMENT
Environmental scanning facilitates making sound business decisions in a global economy. Today, due to increasingly open economies and the resulting increases in global competition and opportunities, firms must consider foreign and domestic opportunities, threats, and trends as they plan. For example, firms that recognize the growing economies in countries like China, India, and Russia can identify opportunities to expand into these new markets. New suppliers are available. Opportunities to lower costs are possibly available. At the same time, new competition emerges. The small firm?for example, the restaurant?will recognize these trends as fruits, vegetables, and other ingredients increasingly come from abroad. The manufacturer will be able to identify opportunities to sell its product in new markets or explore sourcing opportunities abroad. These opportunities also lead to threats from firms abroad. Clearly, the firm today does not compete in a vacuum and the accurate assessment of this reality leads to smarter business decisions.

IMPLICATIONS FOR E-BUSINESS
Undertaking environmental scans requires the collection of data, a process facilitated by the Internet due to the ready availability of economic data and forecasts online. The United States Census Bureau is an excellent source of data related to population growth and demographic trends. The Federal Reserve contains a large database of historical economic data and economic forecasts. Another excellent source of historical economic data is the United States Department of Commerce?s Bureau of Economic Analysis, especially data related to GDP and other more industry-specific data. At the Web site for the Bureau of Labor Statistics, you will find comprehensive databases related to prices, including consumer prices, retail prices, and producer prices, that help to assess the costs of doing business. Labor market data, including employment, the unemployment rate, and wages, also is available at the Bureau of Labor Statistics. Economics forecasts for a series of economic indicators are available at the Web sites of the Board of Governors of the Federal Reserve System and other Federal Reserve Web sites, the Congressional Budget Office, the Mortgage Bankers Association of America, and the National Association of Homebuilders. The University Library also includes a series of resources that are valuable to students learning this material, including EIU Country Intelligence and EIU Data Services, which are good sources of economic data and forecasts.

IMPLICATIONS FOR ETHICS
Undertaking environmental scanning facilitates strategic business decision making. An important component of this process should include an assessment of the culture and demographics of the markets the firm competes in or will potentially compete in. Given this fact, it is important to understand the ethical and cultural characteristics of the customers in these markets, an issue that can require great sensitivity in foreign markets or as new customers in domestic markets emerge. In addition, careful planning can easily be undermined if the firm experiences ethical lapses, as the public will reevaluate the firm and its products with this in mind.

SUMMARY TO GET YOU STARTED ON THE LEARNING PATH
You have learned how effective environmental scanning positively influences business decision making. Planning for the future requires the firm to accurately assess its operating, industry, and remote business environments. The example of the developer presented previously illustrates this. Once you have read this Read Me First and the chapters in the text and have participated in your class discussions, you will have learned to identify opportunities for you to assist your firm with its planning.