The recent boom in new home construction has finally begun to taper of

I am no expert but I an try and differentiate why C is a better choice than A.

A) Interest rates for home mortgages have increased significantly over the past six months. ---- Interest rates for home mortgages have increased does indicate a flaw but not as explicitly as option C. But you have to assume that the people interest depends on the interest rates. I think this is not stated anywhere in the argument and hence a bit too much to assume. It is not necessary that people buy homes with the help of a home mortgage.

C) Sales of condominiums have increased over the past six months.---- This directly indicates the flaw because if the sales of condos have increased more people are still interested in buying new homes. Perhaps there is are a lot of available apartments in the market right now so people are still interested in buying houses. An excess supply could also be a reason why developers are not buying land and contractors are out of work. And perhaps people do not need banks to buy condos.
These were all just hypothetical situations but it shows that if people are buying condominiums, they are still interested in buying new homes.

And of course B, D, E are out of scope.

Hope this helps.