Gabby and Gus Malloy recently got preapproved on a loan for their first house purchase. They are speculating on how much they should bid on their number one choice-a small, three-bedroom bungalow near a major college town. Which of the following indicators may be an important factor in whether they are able to successfully put in a low bid?

Question

Quizplus · Accepted Answer

When people are trying to determine the market value of a large investment such as a house, it is important to review key economic indicators in the area-indicators such as the unemployment rate that would cause housing prices to increase or decrease. If the area has a high unemployment rate, there will not be as many persons interested in buying houses. In fact, the recent recession resulted in significant home foreclosures, where banks could not collect on previous loans. With fewer people interested in purchasing homes due to high unemployment, the market value will decrease. The opposite also holds true: when business is booming and people are relocating to hot spots to work, the market value of homes rises.

Gabby and Gus Malloy Recently Got Preapproved on a Loan