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# In January there was a large drop in the number of new

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Manager
Joined: 22 Feb 2007
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In January there was a large drop in the number of new [#permalink]

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04 Apr 2007, 16:34
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In January there was a large drop in the number of new houses sold, because interest rates for mortgages were falling and many consumers were waiting to see how low the rates would go. This large sales drop was accompanied by a sharp rise in the average price of new houses sold.

Which of the following, if true, best explains the sharp rise in the average price of new houses?
(A) Sales of higher-priced houses were unaffected by the sales drop because their purchasers have fewer constraints limiting the total amount they pay.
(B) Labor agreements of builders with construction unions are not due to expire until the next January.
(C) The prices of new houses have been rising slowly over the past three years because there is an increasing shortage of housing.
(D) There was a greater amount of moderate-priced housing available for resale by owners during January than in the preceding three months.
(E) Interest rates for home mortgages are expected to rise sharply later in the year if predictions of increased business activity in general prove to be accurate.

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Manager
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Re: CR - rise in avg prices [#permalink]

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04 Apr 2007, 17:06
A is right.
Lower-priced houses are sold fewer and higher-priced houses are sold as same as before.

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04 Apr 2007, 17:39
A..

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04 Apr 2007, 18:09
A sound plausible. High networth customers might not be bothered with moartgage loan rates when they decide on purchasing a property.

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Senior Manager
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04 Apr 2007, 19:16
C?

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VP
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04 Apr 2007, 21:04
mm007 wrote:
C?

The question clearly refers to "This large sales drop was accompanied by a sharp rise in the average price of new houses sold".
The time frame in question is the drop of interest rates in January.

So if there was a drop in the sales of the lower to medium priced houses in January while the higher priced houses sales were not affected, the average price shot up.
_________________

Trying hard to conquer Quant.

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Manager
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04 Apr 2007, 21:41
Another A

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Re: CR - rise in avg prices [#permalink]

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04 Apr 2007, 21:46
amd08 wrote:
In January there was a large drop in the number of new houses sold, because interest rates for mortgages were falling and many consumers were waiting to see how low the rates would go. This large sales drop was accompanied by a sharp rise in the average price of new houses sold.

Which of the following, if true, best explains the sharp rise in the average price of new houses?
(A) Sales of higher-priced houses were unaffected by the sales drop because their purchasers have fewer constraints limiting the total amount they pay.
(B) Labor agreements of builders with construction unions are not due to expire until the next January.
(C) The prices of new houses have been rising slowly over the past three years because there is an increasing shortage of housing.
(D) There was a greater amount of moderate-priced housing available for resale by owners during January than in the preceding three months.
(E) Interest rates for home mortgages are expected to rise sharply later in the year if predictions of increased business activity in general prove to be accurate.

The average price of sold houses increased. This means that high priced houses were sold. Hence A
All other points dont make much sense

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Re: CR - rise in avg prices   [#permalink] 04 Apr 2007, 21:46
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# In January there was a large drop in the number of new

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