Concessions increasing across a market while list prices hold steady indicates:
Correct Answer
D) Effective prices are falling ahead of nominal prices
Why this is correct: Effective prices are falling ahead of nominal prices. When sellers offer more concessions (e.g., closing cost assistance) while keeping list prices steady, the net price to the seller decreases. This is often an early indicator of a softening market before closed sale prices officially decline. Why the other choices are wrong: Buyers have become less price-sensitive would typically reduce concessions. Sellers have gained leverage would reduce, not increase, concessions. The market is strengthening would also reduce seller concessions. Exam tip: Rising concessions are a leading indicator of effective price declines in a market.
Why This Is the Correct Answer
Why this is correct: Effective prices are falling ahead of nominal prices. When sellers offer more concessions (e.g., closing cost assistance) while keeping list prices steady, the net price to the seller decreases. This is often an early indicator of a softening market before closed sale prices officially decline. Why the other choices are wrong: Buyers have become less price-sensitive would typically reduce concessions. Sellers have gained leverage would reduce, not increase, concessions. The market is strengthening would also reduce seller concessions. Exam tip: Rising concessions are a leading indicator of effective price declines in a market.
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