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

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Manager
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Joined: 08 Jul 2009
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Kudos [?]: 89 [0], given: 13

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

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New post 05 Aug 2009, 14:10
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A
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D
E

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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.

Kudos [?]: 89 [0], given: 13

Intern
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Joined: 27 Jun 2009
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Re: Jan [#permalink]

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New post 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.

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Senior Manager
Senior Manager
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Joined: 17 Jul 2009
Posts: 286

Kudos [?]: 44 [0], given: 9

Concentration: Nonprofit, Strategy
GPA: 3.42
WE: Engineering (Computer Hardware)
Re: Jan [#permalink]

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New post 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?

Kudos [?]: 44 [0], given: 9

Manager
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Kudos [?]: 89 [0], given: 13

Re: Jan [#permalink]

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New post 05 Aug 2009, 17:43
OA A

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Intern
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Re: Jan [#permalink]

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New post 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.

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Manager
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Joined: 19 Jul 2009
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Kudos [?]: 16 [0], given: 6

Location: United Kingdom
Concentration: General Management, Strategy
GPA: 3.65
WE: Consulting (Telecommunications)
Re: Jan [#permalink]

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New post 05 Aug 2009, 23:00
IMO A...

THe higher priced houses as the choice explains could contribute to the higher average price.

Kudos [?]: 16 [0], given: 6

Director
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Kudos [?]: 373 [0], given: 106

WE 1: 7years (Financial Services - Consultant, BA)
Re: Jan [#permalink]

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New post 05 Aug 2009, 23:55
Agree with A.
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Kudos [?]: 373 [0], given: 106

Intern
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Joined: 15 May 2007
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Re: Jan [#permalink]

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New post 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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