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Market analysis is a process for the identification and study of the market for a good or service. For appraisers, this can be from the perspective of a broad market when a specific property is not the focus of the study or from the perspective of the market in which a specific property competes.
Market analysis for a specific property is an important part of the valuation process. It examines the demand and supply for a property type within the geographic market area for that property. This analysis requires the appraiser to analyze the buyer/seller market as well as the user market which typically differ from one another.
The market analysis begins with the appraiser determining the subject property’s productivity and delineating the market in which it will compete. This analysis is further refined by determining supply and demand factors impacting the property. Once the interaction of supply and demand is determined the appraiser will have a better understanding of the subject’s market penetration and what share of the market the property will capture.