The American Dream Harvard Case Solution & Analysis

Question 1

Various Living Options:

The couple had a choice of three different living options that it was considering to purchase by comparing them on various grounds.

1. 1.      Fairhill:

A national housing developer was building 400 well-designed townhouse units at the Fairhill. They were brand-new and constructed nicely with a reasonably affordable price according to Hanlon’s budget. As per the records, the realtor informed the couple that these housing units were very popular as 100 units were sold in the first weekend of its opening. Due to its high demand, there was an increase in the price of these houses and it almost doubled in a few weeks.It was soon expected to have another boom in its market value. These houses seem to serve the purpose of capital appreciation that Lisa had in mind.

The pitfall of this choice of residency was that it was fairly small in size and the finishing and fixtures in it seemed to be of low quality as compared to their existing apartment. The cars and other vehicles in the neighborhood seem to be very old and worn off, which Lisa did notlike,as the surrounding matters a lot and tells a lot about the type of people living there. The location of the housing scheme was not very ideal as it was located five miles away from the Metro stop that Lisa used every day to get to her workplace. Shifting here would either require them to buy a new car or car pool with any of their colleagues.

1. 2.      Grosvenor Park:

The second option that the couple was considering was right next to their existing apartment and built by their current landlord. It was a project consisting of 189 units of 2300 square feet that had better standards than their current flat as it was constructed by the same builder. However,the realtor was reluctant to show them the model houses and gave a very discouraging and bad review about them. The couple went on to see them by themselves and they eventually liked it. These houses were spacious, beautifully landscaped and well decorated. The company being an award winning constructor only used highest quality of material and equipment.

The issues with this option was that it was expensive than the other options, which the couple had seen prior to it. Tom was a little skeptical about the execution of the oasis garden that the company had builtin its model house. They were also concerned whether the quality of the actual house would match the level of craftsmanship with which they were impressed of.

1. 3.      Maplewood Road:

The last option to consider was an old 3,500 square feet house in an upmarket, well-established neighborhood at 125 Maplewood Road. There were well-groomed and mature trees and yard and serene feel to the area. The owner was demanding a price of $ 250,000 and admitted that the house needed $ 100,000 more for renovations and repair work. The capacity of the house was more than the couple needed as it had 4 bedrooms, 3 bathrooms, a den, huge kitchen along with living room.

The flaws in the house were very eminent as it was 100 years old and started showing signs of aging. The construction plan did not suit the modern architecture and would require a lot of changes and work to be done before it could become as per the requirements of Lisa and Tom. It was also hard to maintain such big house and keep it clean.The American Dream Case Solution

Question 2

Hanlon’s Affordability

The couple was struggling in their careers at the current and had very limited financial resources. The student loans and purchase of the new car did not leave much savings behind for them to make another big investment. Their total combined income per annum was $150,000, which after the annual deductions of utility,rent (of seven months till March 2001) and debt repayment (that would be completed before the year ends),the available income for the year is $ 83,300. Adding the net assets of the couple to this amount will lead to in creasing their affordability to $ 160,700 (Exhibit 1).

 As mentioned in the case that Lisa is expecting to get a substantial bonus at the year-end however,the amount of it is not certain therefore, she cannot account for it in the calculations. Nonetheless,this would definitely increase the cash available at their end to purchase the new house. The couple can spend less than $150,000 as they should keep some reserves for rainy days.....................

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