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True or False? Justify the response. Consider the following information for a house with a market price of $240,000 Interest rate is 5% Cost of
True or False? Justify the response.
Consider the following information for a house with a market price of $240,000
- Interest rate is 5%
- Cost of maintaining a house is 3% of the market value of a house
- An unmaintained house depreciates at a rate of 2% per year
- The city levies property taxes at a rate of 1% of the market value
- For the last 5 years, house prices have increased at a rate of 2% per year
- The annual rent for an identical property is $14,000
Therefore, if the person can obtain a mortgage for half the market price then for the next year, they would prefer to buy rather than rent. (ignore income taxes and transaction costs such as fees for the real estate agent.)
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