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Where The Term Real Estate Come From.

A Brief History And Origins of Real Estate.

Definition: Real Estate

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The Industrial Revolution.

The industrial revolution was one of the great equalizers in human history, The use of machines for manual labor freed many peasants for different tasks, and allowed a privileged few time for education and specialization into new fields of labor opened up by the mechanization of industry. Cobblers, seamstresses and cabinetmakers found that their once invaluable skills were now obsolete, leaving them to return to the land and the coal mines beneath it to try to eke out a living.

People were able to jump classes and bring some of their lower class sensibilities with them, leading to track housing for laborers and a range of products aimed at the lower classes.

The people who made up the classification of peasants now became middle class, blue collar, white collar, and a handful of other things. They owned houses, cars, and eventually, radios and televisions, which suggested what other things they might want to own.

Economic aspects of real property:

Land use, land valuation, and the determination of the incomes of landowners, are among the oldest questions in economic theory. Land is an essential input (factor of production) for agriculture, and agriculture is by far the most important economic activity in preindustrial societies. With the advent of industrialization, important new uses for land emerge, as sites for factories, warehouses, offices, and urban agglomerations.

Also, the value of real property taking the form of man-made structures and machinery increases relative to the value of land alone. The concept of real property eventually comes to encompass effectively all forms of tangible fixed capital. with the rise of extractive industries, real property comes to encompass natural capital.

Mortgages in Real Estate.

The invention of mortgages belongs to no particular country. Mortgages existed for a long time as an exclusive loan given only to nobility. After the industrial revolution, however, the wealth of the world increased to the point where banks opened themselves to "higher-risk" mortgage loans to common people. This allowed individuals to own their own homes and, if they so desired, to become landlords themselves. It took 30,000 years, but home ownership is now open to many people.

Mortgages in developing countries.

In recent years, many economists have recognized that the lack of effective real estate laws can be a significant barrier to investment in many developing countries. In most societies, rich or poor, a significant fraction of the total wealth is in the form of land and buildings.

In most advanced economies, the main source of capital used by individuals and small companies to purchase and improve land and buildings is mortgage loans (or other instruments). These are loans for which the real property itself constitutes collateral. Banks are willing to make such loans at favorable rates in large part because, if the borrower does not make payments, the lender can foreclose by filing a court action which allows them take back the property and sell it to get their money back. For investors, profitability can be enhanced by using an off plan or pre-construction strategy to purchase at a lower price which is often the case in the pre-construction phase of development.

But in many developing countries there is no effective means by which a lender could foreclose, so the mortgage loan industry, as such, either does not exist at all or is only available to members of privileged social classes.

Real Estate Business in Latin America.

The real estate business in Mexico and Central America is different from the way that it is conducted in the United States.

One important difference from the United States is that each country has rules regarding where foreigners can buy. For example, in Mexico, foreigners cannot buy land or homes within 50 km of the coast or 100 km from a border unless they hold title in a Mexican Corporation or a Fideicomiso (a Mexican trust). In Honduras, however, they may buy beach front property directly in their name. There are also different special rules regarding certain types of property: ejidal land - communally held farm property- can only be sold after a lengthy entitlement process, but that does not prevent them from being offered for sale.

In Costa Rica, real estate agents do not need a license to operate, but the transfer of property requires a lawyer.

Influence of Real Estate on the economy and people.

Ownership, specifically ownership of land, was the basis of all the investment opportunities we see today. Without a stable population and a set location, trade and commerce between groups is limited. Ownership has moved from being established by strength to being something you can buy, sell, trade and rent. There has always been a trade off for tenancy, a fee paid to the "owner" for the land and its protection. This responsibility was first afforded to tribal leaders, then to kings and finally to landlords. Now we have the power to own our homes, a move that has changed the way people live.

Categories of estates

Estates in land can be divided into five basic categories:

1. Freehold estates: rights of ownership
   • fee simple (fee simple absolute)-most rights, least limitations, indefeasible
   • fee tail-inalienable rights of inheritance
   • conditional, Defensible estate, or determinable fee-voidable ownership
   • life estate-ownership for duration of someones life
2. Leasehold estates: rights of possession and use but not ownership. The lessor (owner/landlord) gives this right to the lessee (tenant). There are four categories of leasehold estates:
   1. estate for years (tenancy for years)-lease of any length with specific begin and end date
   2. periodic estate (periodic tenancy)-automatically renewing lease (month to month, week to week)
   3. estate at will (tenancy at will)-leasehold for no fixed time or period. It lasts as long as both parties desire. Termination is bilateral (either party may terminate at any time) or by operation of law.
   4. tenancy at sufferance-created when tenant remains after lease expires and becomes a holdover tenant, converts to holdover tenancy upon landlord acceptance; see Forcible Entry and Detain-er Statutes

• Types of leases:
  • gross lease
  • net lease
  • percentage lease

PLAY VIDEO

Real Estate Outlook: Index Says Positive Growth Underway

by Kenneth R. Harney

You might not hear much about them on TV or in the papers, but there are some economic signs popping up right now that are -- at the VERY least -- encouraging for housing and real estate.

Take the gold standard of all forward indicators for the U.S. economy -- the Conference Board's "Index of Leading Indicators," which is based on a broad survey of industry data and predicts economic activity three to six months down the road.

The latest Conference Board index registered its first increase in six months. Now I know that all we hear about these days is recession: it's either already here or it's about to happen.

But the index suggests that there should be positive growth underway in the second half of the year, if not sooner.

Buttressing that forecast is a new report from the National Bureau of Economic Research which found that industrial production in the U.S. showed an unexpected uptick in March.

Here are some other noteworthy developments this past week:

• Applications for mortgages to buy houses were up again, it was the second straight week, according to the Mortgage Bankers Association of America's national survey. Applications for FHA loans to buy houses jumped by three and a half percent -- and conventional purchase applications rose 2.1 percent.

• The federal government reported that house prices nationwide stopped their slide between January and February -- and actually increased by six tenths of one percent.

• Interest rates remain well under 6 percent, according to the Mortgage Bankers, with 30-year fixed rate loans last week averaging 5.74 percent and 15-year loans at 5.27 percent. The Federal Reserve is likely to knock another quarter percent off short term rates next week.

• Freddie Mac announced plans to pump up to 15 billion dollars into the "jumbo conforming" loan market -- those are for high cost areas that really need some stimulus right now, like California.

Now, we're the first to admit that these positive-sounding economic developments are not ballgame-changers for real estate.

We've still got lots of housing inventory to sell before calling an end to the down cycle -- and total sales dipped 2 percent in March, according to the National Association of Realtors.

We're still dealing with a lack of confidence on the part of some consumers who are afraid that maybe prices still have a ways to fall.

But here's the point: It's undeniable that there are some glimmers out there that the underlying economy and financing marketplace, which after all are what support real estate activity, finally may be headed in a positive direction.

Published: April 24, 2008

Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate