Question

If Lewis's house increases in value by 3% each year over two decades, he could still lose money when he sells the house if _____.

Select the best answer from the choices provided.

interest rates on mortgages fell 3% over the same time

his repair and maintenance costs were more than 3% a year

homes in other areas of town lost more than 3% of their value

his down payment was significantly more than 3% of the house value

Answer 1

Taking the options one by one:
If interest rates on mortgages fell, Lewis would be paying less in mortgage payments, so he'd actually have more money.
A periodical cost, like yearly repair and maintenance, would increase the amount Lewis is "paying" for the home. If this exceeds the increasing value of the home, Lewis would indeed lose money when he sells.
The value of homes in other towns wouldn't directly impact Lewis's house value.
A one-time down payment would presumably be made up once the house is sold, and a large down payment wouldn't necessarily mean Lewis loses money. In fact, if he puts more money down initially, he has to pay less in interest over time, which could end up saving money.