3. A former NYU Stern Professor "John" (this one is a true story) recently asked me for advice on purchasing a property in Massachusetts. He was looking at a property similar to 80 Captains Row, Bourne, MA 02532. Look up the 80 Captains Row property on Zillow.

a)Notice that the "zestimate" - Zillow's best estimate of the house price - jumps in July 2018. Can you figure out why Zillow's formula to estimate prices would predict such a large increase? Do you think the variable that accounts for this increase should be in their formula to estimate the price?

b)Suppose that John puts 20% down and paid $1.3m on the property. Using the mortgage rates you computed, estimate the monthly payment for a 30-year fixed rate mortgage on the property.

c)Suppose that John has the money to pay for the property in cash, or get a mortgage. Factoring in the interest deduction (at a 37% tax bracket); how much will John have paid in total for the mortgage after 30 years?

d)If John could instead reinvest the cash somewhere else - what rate of return would John need on the alternate investment for it to make sense to get the mortgage instead of paying fully in cash?

e)Suppose the property has a $14k/year flood insurance requirement if the property has a mortgage. How does your answer to d change?

f)Should John get the mortgage?