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May 24th, 2007 12:09 PM by David W. Welch
New home sales were announced today for April, and the numbers were ambiguous at best. The number of sales was way up, in fact it was the biggest jump in 14 years I think. However, prices were way down compared to both March and last April. The price drop was the biggest since 1970. Locally, we had the opposite occurring with sales way down, but prices continuing to increase. Only in the last two months have prices actually come down a bit.
This all seems somewhat counter-intuitive, but remember the concept of elasticity in your macro economics class. Well, the market is still testing the elasticity of demand of buyers, and the elasticity of price offered by sellers.