Mortgage rates fall two points after a long high-rate stretch. Sales volume doubles within a quarter while listings stay flat. What demand phenomenon is this?
Correct Answer
B) Pent-up demand releasing as affordability returns
Why this is correct: A significant drop in mortgage rates improves affordability, releasing demand from buyers who were waiting on the sidelines (pent-up demand). This causes a sudden surge in sales against stable listings, characteristic of a demand release. Why the other choices are wrong: "Ordinary seasonal variation" would not typically cause volume to double in a quarter following a rate drop. "Panic selling by rate-locked owners" describes motivated sellers, not the doubling of sales with flat listings. "A supply shock from new construction" would increase listings, not keep them flat. Exam tip: Pent-up demand is stored demand released by a positive market change (e.g., lower rates). Look for a surge in sales with stable or low supply.
Why This Is the Correct Answer
Why this is correct: A significant drop in mortgage rates improves affordability, releasing demand from buyers who were waiting on the sidelines (pent-up demand). This causes a sudden surge in sales against stable listings, characteristic of a demand release. Why the other choices are wrong: "Ordinary seasonal variation" would not typically cause volume to double in a quarter following a rate drop. "Panic selling by rate-locked owners" describes motivated sellers, not the doubling of sales with flat listings. "A supply shock from new construction" would increase listings, not keep them flat. Exam tip: Pent-up demand is stored demand released by a positive market change (e.g., lower rates). Look for a surge in sales with stable or low supply.
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