1. House Cost = $200,000
Expected increase in housing price= 2% = 0.02
Expected capital gain/ loss = 200,000*0.02 = $4,000
The expected capital gain (or loss) is $4,000.
2. The real rate of return is -3%.
Real rate of return is 2% -5% = -3%
3. You will be more likely to buy.because Real rate of return is increased to -1%
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