Real estate is the property, land, buildings, air rights above the land and underground rights below the land. The term real estate means real, or physical, property. “Real” comes from the Latin root res, or things. Others say it’s from the Latin word rex, meaning “royal,” since kings used to own all land in their kingdoms. The U.S. Constitution initially restricted voting rights to only owners of real estate.
Four Types of Real Estate
There are four types of real estate:
Residential real estate includes both new construction and resale homes. The most common category is single-family homes. There are also condominiums, co-ops, townhouses, duplexes, triple-deckers, quadplexes, high-value homes, multi-generational and vacation homes.
Commercial real estate includes shopping centers and strip malls, medical and educational buildings, hotels and offices. Apartment buildings are often considered commercial, even though they are used for residences. That’s because they are owned to produce income.
Industrial real estate includes manufacturing buildings and property, as well as warehouses. The buildings can be used for research, production, storage, and distribution of goods. Some buildings that distribute goods are considered commercial real estate. The classification is important because the zoning, construction, and sales are handled differently.
Land includes vacant land, working farms, and ranches. The subcategories within vacant land include undeveloped, early development or reuse, subdivision and site assembly. Here’s more at Land Broker Transactions.
How the Real Estate Industry Works
Real estate also refers to producing, buying and selling real estate. Real estate affects the U.S. economy by being a critical driver of economic growth.
Construction of new buildings is a component of gross domestic product. It includes both residential, commercial, and industrial buildings. In 2018, real estate construction contributed $1.15 trillion to the nation’s economic output. That’s 6.2% of U.S. gross domestic product. It’s more than the $1.13 trillion in 2017 but still less than the 2006 peak of $1.19 trillion. At that time, real estate construction was a hefty 8.9% component of GDP.
New home building is a critical category. It includes the construction of single-family homes, townhouses, and condominiums. The National Association of Home Builders provides monthly data on home sales and average prices. The data on new home sales is a leading economic indicator. It signals how the housing market will do in nine months. That’s how long it takes to construct new homes. The NAHB also reports new home starts, those are the number of home construction projects on which ground is broken.
Real estate agents assist homeowners, businesses and investors buy and sell all four types of properties. The industry is typically divided up into specialists that focus on one of the types.
Sellers’ agents help find buyers through either the Multiple Listing Service or their professional contacts. They price your property, using comparative listings of recently sold properties known as “comps.” The can help you spruce up your property so it will look its best to customers. They assist in negotiations with the buyer, helping you get the highest price possible. Here are more sellers’ agent services.
Buyers’ agents provide similar services for the home purchaser. They know the local market. That means they can find a property that meets your most important criteria. They also compare prices, called “doing comps.” It allows them to guide you to areas that are affordable. Buyers’ agents negotiate for you, pointing out reasons why the seller should accept a lower price. They help with the legalities of the process, including title search, inspection and financing.
Real estate agents who want to increase their professionalism become REALTORS®. The National Association of REALTORS® publishes provides monthly reports on the number of homes resold and their average price. It’s a better indicator of the health of the overall housing industry than new home construction.