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

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Manager
Joined: 08 Jul 2009
Posts: 164
In January there was a large drop in the number of new [#permalink]

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05 Aug 2009, 14:10
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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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Intern
Joined: 27 Jun 2009
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05 Aug 2009, 15:31
IMO E
if the mortage rates were to increase later in the year... there is a possibility that people will buy the new houses now.
Senior Manager
Joined: 17 Jul 2009
Posts: 276
Concentration: Nonprofit, Strategy
GPA: 3.42
WE: Engineering (Computer Hardware)

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05 Aug 2009, 17:05
I'm gonna go with A...although there are a large drop in new houses sold due to people waiting for mortages, but new house prices were going up, most likely new houses sold were to ones who were not financially restricted which brings up the average sale price?
Manager
Joined: 08 Jul 2009
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05 Aug 2009, 17:43
OA A
Intern
Joined: 25 Jul 2009
Posts: 25

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05 Aug 2009, 20:09
A for me too
The cost of the expensive houses increases the average cost even though the cost of the moderate-low houses fell.
Manager
Status: Applying
Joined: 19 Jul 2009
Posts: 138
Location: United Kingdom
Concentration: General Management, Strategy
GPA: 3.65
WE: Consulting (Telecommunications)

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05 Aug 2009, 23:00
IMO A...

THe higher priced houses as the choice explains could contribute to the higher average price.
Director
Joined: 05 Jun 2009
Posts: 723
WE 1: 7years (Financial Services - Consultant, BA)

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05 Aug 2009, 23:55
Agree with A.
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Intern
Joined: 15 May 2007
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06 Aug 2009, 00:21
+1 for A

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Re: Jan   [#permalink] 06 Aug 2009, 00:21
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# In January there was a large drop in the number of new

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