1) Over the past 125 years housing in the US appreciated at a real rate of approximately ____________%. This means that if over the same time period inflation averaged 3%, the nominal US housing appreciation was roughly ____________%, on average.

2) Assuming that the current price-to-income ratio for housing in Florida is 7. a) What would the price-to-income ratio be in 50 years if income will grow at a pace of 3%/year and housing will appreciate at a pace of 7%/year on average? b) Can these salary growth and housing appreciation pattern continue in the long run? Explain!

3) What can we learn from the fact that housing prices for a specific location through time are bounded within some range of price-to-income? What can we say about prices when they near the bottom/top of that historic range?

4) Explain how the housing wealth effect may positively or negatively affect the overall economy.

5) What are the three main factors that affect broad housing price appreciation over the long run?

6) Assuming that during a given year average income in Oregon increases by 4% while inflation is 3%. What will be the Oregon real estate price appreciation during that year? Explain!

7) What is the difference between a junior and a senior mortgage? Which one is riskier from the lender point of view? Why?

8) You would like to borrow $150,000 using a 15-year CPM at a fixed rate of 3%. What will be your monthly payment if the mortgage if fully amortized? 40% amortized? 75% amortized? Please use your calculator to receive the answers and show your work

. 9) What is the difference between a negatively amortize mortgage and a reversed annuity mortgage? How are they similar?

10) 4 years ago you bought a home for $200,000, which at the time was 3% below the homes fair market value. Since then, the market value of your home appreciated at a compounded rate of 2.5% annually, on average. What is your current equity in the home if you were to sell it at a fair market value? Assume that when you purchased the home you took a $160,000, 5%, interest-only mortgage and made the minimum required payments.