Which of the following tends to lead to an increase in house prices?
A. An increase in interest rates
B. Regulators specifying a maximum level for the loan-to-value ratio on mortgages
C. Banks reducing the minimum FICO score that borrowers are required to have
D. An increase in foreclosures
C
An increase in interest rates tends to lower house prices because buyers have higher financing costs. Limiting the loan-to-value ratio means that some potential buyers cannot get the mortgages they require and there is less demand for houses with the result that prices tend to decline. An increase in foreclosures increases supply and this also lowers prices. However, if banks relax their lending standards (e.g. by reducing the minimum FICO scores they require) demand should increase because more people can get mortgages. As a result prices will increase.
You might also like to view...
Sarah has filed a discrimination charge against her employers. Prior to litigating the discrimination charge, the Equal Employment Opportunity Commission (EEOC) would do all of the following EXCEPT:
A. propose a conciliation agreement to the respondents. B. evaluate the charge and decide whether or not to proceed with it. C. file a Supreme Court appeal as soon as possible. D. determine whether the gathered evidence will support a lawsuit.
Did Sotheby’s have an ethical obligation to intervene and pay the consignees after Ritchie’s failed to be able to do so?
Edinger Industries is a division of a major corporation. The following data are for the latest year of operations: Sales$20,760,000 Net operating income$2,553,480 Average operating assets$6,000,000 The company's minimum required rate of return 16%Required:What is the division's residual income?
What will be an ideal response?
Which of the following best describes the market segment referred to as the bottom of the pyramid (BOP)?
A) a national segment of lower income consumers B) a national segment of non-native language speakers C) a national segment of individuals with a high-school only education D) a global segment of consumers who earn less than $2 per day E) a global segment of children in lower income families