King Rat (gkr) wrote,
King Rat

Eco 200: selling the old house

(individual) Henrietta George bought her old house 48 years ago for $2000. She could get $200,000 for it today if she chose to sell it. About how much do you suppose it's costing her per month to continue living in her large old house?

Her house is appreciating at the rate of $343 per month, assuming linear progression that continues. The opportunity cost of not selling is $343 per month, minus the cost of living somewhere else. Given that it's likely she would have to pay more to live somewhere else, it's marginally better to stay in the house.

However, she could spend or invest the $200,000. Staying in the house means she gives up that opportunity which could be potentially lucrative, but impossible to calculate given current information.

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