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Subtle one

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Subtle one

by abhijeetsinghai » Sat Mar 07, 2009 6:23 am
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.

Well, I marked the right answer but it was blind guess...though i tried POE....Plz throw ur views....thanks....
OA after some discussions.
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Re: Subtle one

by Vemuri » Sat Mar 07, 2009 7:13 am
The large sales drop was accompanied by a sharp rise in the average price of new houses sold. We need to find the gap here (in the options) to best explain this paradoxical situation.

A --> Doesn't help explain.
B --> Irrelavant
C --> Possible. Shortage in housing is a good enough reason to explain the paradox.
D --> Doesn't help explain.
E --> Doesn't help explain.

My answer is C.
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by dendude » Sat Mar 07, 2009 7:31 am
I would choose A

The points to note in the argument are number of houses and average price of houses

In A, it says that higher-priced houses were not affected by the sales drop.
i.e, higher priced houses continued to sell as normal, whereas houses that were moderately or lower priced were experiencing drop in sales..
So if higher-priced houses were still being sold, then that would obviously skew the average price of houses and cause a sharp increase.
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by karmayogi » Sat Mar 07, 2009 12:21 pm
IMO A.

Given, sales dropped and avg increased.

Option A gives the reason for increase in avg, despite drop in sale.
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by Sher1 » Sat Mar 07, 2009 6:11 pm
A helps explain why avg prices would be higher. The higher prices of expensive house is driving market price higher even when most homes are not being sold.
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by dgr8onerip » Sun Mar 08, 2009 2:57 am
IMO- C
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.
facts-
number of houses sold is less because ppl are expectin interest rates to go down further
but when sales go down prices also go down to increase sales.
But here prices increase. Hence some other factor is contributing.
If available houses for sale are limited then no matter what the owners will want to sell it at high prices
in option C it is clearly stated that shortage has been causing an increase since the past three years. hence continuous shortage will result in a hike

hence IMO- C
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by Eye-on-the-Prize » Mon Mar 09, 2009 6:22 am
I think the answer has to be A.

A - for reasons stated by dendude, this explains the increase in average price.

C - I believe this statement contradicts the argument. If prices of new houses have been rising over the past three years due to an increasing shortage of housing, then fewer homes are available, and thus an increase in demand drives the prices up. However, the question tells us that more houses suddenly become available ("large drop in the number of new houses sold"). If choice (C) accurately describes the relationship between prices of new homes and demand, then we should expect the prices to go down.
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by delhiboy1979 » Tue Mar 10, 2009 1:27 am
IMO C, this is my understanding.

Number of houses sold is decreasing, avg price however is still increasing. As option C says that there has been a shortage of houses and there has been a steady increase over 3 years, wouldnt that in turn raise the average price of the houses. The avg price can increase if the sum total of houses sold is increasing and the number of the houses sold is decreasing.

I think the difference we need to understand is that people are not buying houses not because they are waiting for them to get any cheaper, but that the interest on the mortgage is getting cheaper. the houses will stay expensive.

Anyway thats just my view, whats the OA.
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by quocbao » Wed Mar 11, 2009 7:34 am
I would choose A, but what is the OA ?
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by dgr8onerip » Wed Mar 11, 2009 8:12 am
abhijeet can you please post the OA
target score- anything above 700
preferably above 750
gmat prep 1- 710
powerprep 1- 730
barrons test 1- 760
kaplan test 1- 620 (lol)
kaplan test 2- 680
score 800 1-720
score 800 2- 730
score 800 3-750
score 800 4-720
score 800 5- 710
gmat prep 1 (retake)- 710
gmat prep 2- 730
gmat prep 2 (retake)- 720
actual gmat - 770 :)
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by dgr8onerip » Wed Mar 11, 2009 8:16 am
https://www.beatthegmat.com/1000-cr-test ... 13968.html

read this
it says that the answer is A
but I am not convinced by the logic written by parallel chase
target score- anything above 700
preferably above 750
gmat prep 1- 710
powerprep 1- 730
barrons test 1- 760
kaplan test 1- 620 (lol)
kaplan test 2- 680
score 800 1-720
score 800 2- 730
score 800 3-750
score 800 4-720
score 800 5- 710
gmat prep 1 (retake)- 710
gmat prep 2- 730
gmat prep 2 (retake)- 720
actual gmat - 770 :)
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by tanviet » Wed Mar 11, 2009 7:54 pm
C is wrong because C contradict the argurment. There is no shortage because customer is "waiting" and posponing their buying.
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by delhiboy1979 » Fri Mar 13, 2009 3:12 am
Umm, it says so in the statement though;
'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.'
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by gmat620 » Fri Mar 13, 2009 8:04 am
Good discussion.....i checked it out at another forum

OA: A
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by vanessa.m » Sat May 14, 2016 2:33 am
I will choose A
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