The single-family housing market has long been a cornerstone in the United States economy and represents a major portion of the nation’s overall wealth. With a peak total value of over $47 trillion dollars, the single-family housing market accounts for a great deal of capital for many individuals, as well as corporations (Chen, Katz, 3). For many Americans, the equity that lies in their homes makes up a majority of their net worth. That is why it is so important to understand how this market functions and what factors cause the most fluctuation in the price, sales rate, and overall market. In the last three years, single-family housing has been more volatile than ever before, especially in cities like Phoenix which have a growing population and prosperous economy. This led me to question what had caused this fluctuation and how can I prepare for the future? This thesis explores the effect that interest rates have on the housing market by focusing on the relationship between interest rates and the single-family housing market, focusing primarily on the Phoenix metro area. The goal of this thesis is to analyze the effects that micro and macro factors have on the single-family housing market to determine if interest rates are the driving factor.

This thesis investigates the performance of publicly traded equity real estate investment trusts (REITs) in the United States (U.S.) and their sensitivity to underlying macroeconomic factors. Specifically, this study employs a quantitative research analysis that utilizes technical, correlation, and regression analyses to identify how different REIT sectors react to changes in economic conditions. Data for the study was collected from publicly available and reliable sources, including the National Association of Real Estate Investment Trusts (Nareit) and the Federal Reserve Economic Data (FRED). Four areas of research guide the study. First, the study explores the relationship between different REIT property sectors and the underlying causes of similarities and differences in sector performance. Second, the study examines how macroeconomic variables, such as GDP, inflation, and interest rates, affect the performance of publicly traded equity REITs. Third, the study investigates the significance of the relationship between macroeconomic factors and REIT sector performance to assess the varying impact on different property types. Finally, the study explores whether a model can be developed to predict the performance of REIT sectors based on macroeconomic variables. Overall, the findings in this study will provide valuable insights into how REITs across and within property types perform and react to changes in the macroeconomic environment. Furthermore, because real estate represents a significant component of the economy, it can offer investors valuable insights into broader economic trends and conditions, contributing to a better understanding of economic cycles and identifying potential opportunities and risks.

My Barrett Honors Thesis focuses on answering the question of whether a current owner of a single family home in Tempe, Arizona would receive an adequate return on investment (“ROI”) to justify adding an accessory dwelling unit (“ADU”) on their property for the purpose of generating rental income and capital appreciation. I focused my research on Tempe’s zoning regulations, ADU general contractor (“GC”) options, possible parcels, proposed construction plans and budget, and lastly, a pro forma to determine ROI. After conducting the research, discussing with several GCs, and modeling returns, I determined that unlevered ADU development constitutes a novelty, not a solid investment choice with today’s market conditions. Factors that would change this recommendation decision would include a decrease in interest rates or a tempering of construction costs.

Historically, no other asset has created more wealth and the opportunity for inter-generational wealth than real estate.1 However, not all investments are profitable and not all that have invested in real estate have generated wealth for themselves. In particular, this paper seeks to examine a particular strategy known as house hacking which can help individuals in their pursuit to invest in and own real estate. 2 There will be a thorough description of the term “house hacking”, an analysis of the social and economic conditions that foster this investment opportunity, an evaluation of benefits and risks, overview of legal considerations, and I will use my own specific situation as a case in point. The focus is to educate the reader on this specific investment strategy, demonstrate why this is a viable plan, and provide a sustainable model for future investing.