Recently in City X, developers have stopped buying land, contractors

Question

Recently in City X, developers have stopped buying land, contractors have found themselves going without work for longer periods, and banks have issued fewer mortgages. There must be fewer new residents moving to City X than there were previously.

Which of the following indicates a flaw in the reasoning above?

A. This year several housing blocks have gone on the market after being held up for months by legal red tape.

B. The average size of a new home has increased significantly over the past several years.

C. Re-sales of condominiums have increased over the past six months.

D. The cost of materials such as lumber and cement has decreased over the past year.

E. Sales of other big-ticket items, such as automobiles and boats, has remained steady over the past year.

This question is part of the  GMAT Club Critical Reasoning: "Weaken an argument" revision Project.

KarishmaB · Accepted Answer

There are some problems in this question but nevertheless answer is (A).

Premises:

Developers have stopped buying land, 
Contractors have found themselves going without work for longer periods, 
Banks have issued fewer mortgages. 
(So fewer homes are getting constructed and bought)

Conclusion: There must be fewer new residents moving to City X than there were previously.

A. This year several housing blocks have gone on the market after being held up for months by legal red tape.
Many previously built housing units which were on hold have flooded the market leading to oversupply. Hence, it explain that developers and contractors are out of work. But it doesn't address the banks issuing fewer mortgages. With the banks in the picture, the argument shows us that fewer people are buying houses. The conclusion is that fewer new people are coming to city X. There could have been a much better weakener which explains that people are not buying houses because of the reduced rents or something similar. But this does go on to explain a part of the situation (fewer homes are getting constructed) so in case there is no other better option, we will go with this.

B. The average size of a new home has increased significantly over the past several years.
Size of the homes is out of scope. We are only concerned about the number of homes.

C. Re-sales of condominiums have increased over the past six months.
You might think that this explains why developers and contractors are out of work since new people could be buying old houses but people who are selling their houses would need new houses in this case. Hence it does not explain developers, contractors and bankers out of work. It doesn't weaken our conclusion much except if most people had multiple homes and are selling out of those. In that case, it would be similar to option (A) where it would explain fewer new constructions. But expecting most people to have multiple homes is too much of an assumption. So option (A) is better.

D. The cost of materials such as lumber and cement has decreased over the past year.
This should encourage more construction, not less. Hence, not relevant.

E. Sales of other big-ticket items, such as automobiles and boats, has remained steady over the past year.
Out of scope. Perhaps people have started buying more automobiles and boats, we don't know. The relation between homes and other big ticket items is not known.

Answer (A)

Bunuel · Answer

OFFICIAL EXPLANATION

The conclusion of the argument is that "there must be fewer new residents moving to City X than there were previously." Why? Because of several observed factors (e.g., developers not buying land, contractors without work, banks issuing fewer mortgages) that the author assumes result from the fewer people trying to buy new homes. We are asked to find a flaw in the reasoning of this argument. 
 
 (A) CORRECT.  This suggests that there might be another reason for the decline in home construction: the supply of available housing has been increased through the release of many previously built homes. Therefore, the reasoning in the argument is flawed. 
 
(B) The size of homes, by itself, does not point to any flaw in the argument. 
 
(C) The argument centers on new homes, so re-sales of condominiums are not directly related. 
 
(D) If materials cost less, it seems more likely that any decrease in new home construction could be attributed to the stated causes. 
 
(E) Sales of cars and boats are not related to construction of new homes.

warriorguy · Answer

Hello  VeritasPrepKarishma ,

Thank you for the explanation. Though I chose A (since it seemed more refined than C), I am still not convinced with explanation to discard C.

My reasoning was C talks about past 6 months and the stem talks about "recently". We don't know recent this "recently" could be. It could be past 2 months with C being true in that time frame.

A plays it safe and does not mention any time reference.

any thoughts?  GMATNinja ,  GMATNinjaTwo ?

KarishmaB · Answer

I wouldn't use that logic. The argument uses the word "recently". Option (A) uses "this year" and option (C) uses "6 months". We don't know what recently means so both could be assumed to be recent.

The problem with (C) is that it doesn't make sense with the argument. The conclusion is derived based on certain conditions of today. A weakener would give an alternative to the conclusion which would explain the conditions and hence reduce the probability of the conclusion being true.

Option (A) explains the situation faced by contractors and developers, but it doesn't explain why banks are issuing fewer mortgages. 
Option (C) doesn't explain the situation faced by all - contractors, developers and bankers. If resale increases, people who are selling their house would need to buy a new house hence the contractors and developers should not be out of work. Also, whenever buying happens - new house or old - mortgages will be issued.

Hence (C) will not be the answer.

Labmalo · Answer

Please correct me if my logic is wrong, but the conclusion is "There must be fewer new residents moving to City X", and I think C does better job than other to weaken the conclusion (even there is a weakness in it). It doesn't matter if the ones who sold their old houses need new house or not or not, there are still many NEW RESIDENTs come to city X as they bought these old houses (The weakness of this Ans is of course there is possibility that the current residents bought those houses. But, we can not deny the high possibility that many NEW RESIDENTS bought those house and then the NEW RESIDENTS of city X increase→ weaken the conclusion)

The option A says " This year several housing blocks have gone on the market ", but does it mean that many houses were bought?? No right? Those houses were just released on the market "after being held up for months by legal red tape". Then how can we say that the are more NEW RESIDENTS come to city X, as we do not know that those house were purchased or not?

The option A says " This year several housing blocks have gone on the market ", but does it mean that many houses were bought?? No right? Those houses were just released on the market "after being held up for months by legal red tape". Then how can we say that the are more NEW RESIDENTS come to city X, as we do not know that those house were purchased or not?

KarishmaB · Answer

A is correct (out of the given options). Whether the new houses were bought or not, doesn't matter. The point is they increased the supply and hence the builders stopped building new houses. So builders being out of work may have nothing to do with how many new residents moved to City X. Perhaps many moved but there was enough supply of houses in the market.

On the other hand, (C) says that resale has increased. Note that it doesn't say that more new houses are on the market. It says that resale has increased. So people are selling their houses for whatever reason. They could be upgrading/downgrading according to their needs. It doesn't explain why builders are not building anymore and why banks are issuing fewer mortgages.

venstein · Answer

I chose the correct answer (A), but still find option (C) plausible: let's assume the number of residents moving into city X hasn't changed, but the number of people leaving city X has increased and those people are selling their houses, which in turn are bought by people moving into city X=> hence, less demand for new housing as there is an increasing stock of houses on a secondary market despite the same number of people moving to city X. Where is my logic wrong?

saman283 · Answer

Hi  VeritasKarishma , I am still not convinced why A is the right answer. This is 'finding a flaw in the reasoning' question. So let's focus on the argument structure:

Conclusion: fewer new residents moving into the town
Premise: developers not buying land, contractors out of work etc.

Correct answer choice will point out a flaw to explain  why this conclusion can't be drawn even if the premise is correct .

I believe that option A focuses more why premise is correct but the option C stressed why conclusion might be wrong. As far as I know we do not need to explain why premise on its own is correct as long as we explain the  disconnect from premise to conclusion.

Other way to look at the problem is that the author says developers are not buying land etc. and concluding that fewer residents must have moved into the town. Here he/she is assuming that there can't be any other reason for developers to buy less land etc. In this case, we have flipped the conclusion to "developers are not buying land" and option A in that case will justify an alternate explanation for that to occur.

Hence, it really boils down to the way you read/comprehend the argument. I think that "fewer residents moving" is presented like a conclusion and hence we must attack this rather than proving that premise could also occur. Therefore, C for me is a better answer.

KarishmaB · Answer

The argument tells us that premises A, B and C hold (developers not buying land, contractors have no work and bank not giving mortgages).
It concludes that this implies that demand for housing has reduced. We would expect that when new residents come to stay, they would look for a house (whether buy or lease is irrelevant; they would need a house to stay in). So if new residents were moving in the city, new houses would get constructed because of their demand. One wouldn't expect the demand to change much from current residents. If they look for a new house, their old house will become available to someone else. So normally, one would expect an exchange to occur among current residents. Demand increases when new people come in to stay in the city.

When we conclude that because supply is not taking place, it means demand must not be there, it fails to take into account that there could be over supply from before. That could be the reason why the supply of housing is not happening. People may still be coming in the city but they might be buying houses lying vacant. Hence, (A) is correct.

Option (C) tells us that resales have increased. Resales can be thought of as exchanges. They should not impact demand and supply normally until mentioned otherwise.

Also note that an option that tries to strengthen the premise will not be correct because the premise is already taken to be true.

einstein801 · Answer

manhattan increasingly coming up with **** questions... A will not work as well as the "issue fewer mortgages" is a problem

Recently in City X, developers have stopped buying land, contractors

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Recently in City X, developers have stopped buying land, contractors

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