Real estate is an important component of the U.S. and global economies. For many Americans, homeownership doubles as a first investment. Beyond a primary residence, investors also can buy into the commercial real-estate market: Office buildings, multifamily housing, hospitals, parking lots, storage facilities, retail properties, call centers, distribution hubs, hotels and restaurants form a sector with its own economic ups and downs.
In 2016, the S&P 500 (.SPX) recognized real estate as its own sector, separating it from financial services where it had been buried for years—a move some view as a portent of more real-estate investment to come and that others view with indifference. Currently, real estate accounts for less than 5% of the S&P 500 by market cap.
How much do you know about real estate—and real-estate investing? Let's start with a few basics (but we assure you, they will get harder).
1. How do investors participate in the real-estate sector?
A. Mutual funds and ETFs
C. As direct owners/landlords
D. All of the above
2. What is a REIT?
A. Real-estate investment trust
B. Real-estate investment tax
C. Real-estate insurance tariff
D. Real-estate investor trade
3. True or false: Real estate is a countercyclical sector.
4. Which commercial real-estate subsector is least prosperous now?
A. Multifamily housing
Now, some history questions:
5. What were typical residential mortgage terms before the creation of the Federal Housing Administration (FHA) and the Federal National Mortgage Association (Fannie Mae) in the 1930s?
A. 3.5% down with a 30-year payoff
B. 20% down with a 20-year or 30-year payoff period
C. 50% down with a 10-year payoff
D. 0% down, interest-only loans with a 30-year payoff period
6. How did real estate contribute to the most recent financial crisis and related recession?
A. Lenders relaxed standards and underwrote loans that wouldn't fly today
B. Banks knowingly and unknowingly sold mortgage securities containing unsound assets, and ratings firms failed to accurately rate real-estate debt sold to the secondary market
C. Investors speculated on housing and homeowners
D. All of the above
7. During the real-estate bubble, which economist was known as "Dr. Doom?"
A. Robert Shiller, author of "Irrational Exuberance" and co-developer of the Case-Shiller Home Price Index
B. Nouriel Roubini, NYU professor, formerly an economist advising the White House Council of Economic Advisers
C. Karl Case, the late professor/researcher who co-developed the Case-Shiller Home Price Index
D. Ben Bernanke, former Fed chairman, now a Brookings Institution economist
And some market questions:
8. What foreign country's investors are buying the most U.S. commercial real estate?
9. What U.S. city has the lowest rate of apartment vacancy?
A. New York
C. San Francisco
10. Which commercial real estate approach isn't recommended in 2018?
A. Take advantage of demand for new housing
B. Bet on property price appreciation
C. Invest in "experiential retail"
D. Senior housing
|For more news you can use to help guide your financial life, visit our Insights page.|