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QUESTION

# (7) Go to http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?

(7) Go to http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?ref=economy&_r=0&abt=0002&abg=0

(In case this link does not work: go to www.nytimes.com and search for “Upshot Is It Better to Rent or Buy”)

Keep all default assumptions and assume the home you want buy costs \$1.5m. The resulting “break-even rent” is then \$4,819 (note: you can simply enter the home’s price instead of adjust it on the graph). We are now interested in the effect of various variables on the “break-even rent.”

Calculate the “break-even-rent-elasticities” 1of the a) mortgage rate b) down payment c) home price growth rate d) rent growth rate e) investment return rate f) inflation rate g) property tax rate h) marginal (income) tax rate

For each variable assume an increase by 10%. For variables that are measured in % use a percentage of the percentage. For instance, if inflation were 4% a 10% increase results in a 4.4% (and not a 14%) inflation rate. Also, for each variable hypothesize why the “break-even rent” will be increasing or decreasing (just one sentence). Note: Make sure you always go back to the default adjustments when you calculate the elasticity of a new variable.