Based on the following scenario, answer questions 4a, 4b, and 4c:

Buying a Home - Personal Notes Scenario:You are getting a loan to buy your first home. It is a $250,000 home with 3 bedrooms and 2 bathrooms. The price is so low because the economy was bad, a lot of people lost their jobs, and few people are buying homes. You got the following information from the bank:

• Loan Amount: $150,000
• Interest Rate
  • 1 month ago: 4.5%
  • Today: 4.1%
• Loan Period: 15 years (180 months)

4a. Based on what you are hearing from friends and what you know about supply and demand in financial markets, what would you predict about the level of interest rates for house loans in the future? Will they stay the same, increase, or decrease?

4b. Explain your answer by drawing and explaining 2 supply and demand curves, one showing the interest rate today (assume it is 4.1%) and one predicting what the interest rate will look like in 1 month.

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4c. Based on what you know in this situation, does it matter when you make the decision to purchase a house?