5. Calculate the nominal and real annual rate of housing price appreciation

rate for Miami and for Houston for the requested different time periods using the housing

price index data and the inflation index data provided to you in tab A5 of the Excel

spreadsheet. In total, you need to calculate 16 values that will appear in the 16 yellow cells

of that Excel tab.

6. Given your results from the previous problem:

a. What can you say about the magnitude and the volatility of housing price appreciation

in the short, medium and long run?

b. Are the results from question 5 consistent with the theory of price appreciation we

discussed in the beginning of this course? Briefly explain.

10. Consider an income producing property that according to your assumptions

and estimations is currently worth $4M on an unlevered basis when a 7.5% required rate

of return is applied. One of the assumptions that you have made when arriving at that

estimate is that you will sell the property in 6 years for a CAP of 7%, which translates to

$4.8M at that future point in time.

a. At what price will you sell the property in 6 years if all your assumptions materialized

except that you will sell the property for a CAP of 8% instead of 7%? Show your

calculations.

b. All other things equal, by how much the situation described in part a affects the current

value of the property. Show your calculations.