Analyzing Complex Appraisals for Business Professionals

Chapter 11

How Government Policies Can Affect Property Values

In basic economics, supply and demand are typically the primary drivers of prices, and with less expensive items that do not require financing, this is the predominate principle. However, with purchases that are typically financed, the interest rate of the debt instrument becomes another major factor. The purchases of real estate and businesses are normally financed, and interest rates fluctuate mostly based on the discount rate set by the Federal Reserve (the Fed) in the United States. The discount rate is the rate at which banks borrow money from the Fed. They may also borrow from other institutions at the Fed, and that rate is known as the federal funds rate. Those trades often ...