Summary of the Article

Summary of the article:
U.S. Economy: New-Home Sales Decline to Record Low (Update 1)
By Bob Willis
Bloomberg Businessweek
February 24, 2010
In January 2010, new home sales in the United States dropped to their lowest level on record, as
homebuilders faced significant competition from foreclosures of existing homes. The decline in sales occurred
despite projections made just one month earlier that new home sales would rise in January. The sales decline
reemphasized Fed Chairman Ben Bernankeʹs comments regarding the slow recovery of the economy and the
need for continued low interest rates.
New home sales declined in the Northeast, South, and West, with only the Midwest showing a small gain.
For the entire nation, the median price of a new home fell to its lowest level since December 2003. Based on
the sales rate in January 2010, the country had a 9.1-month inventory of homes, its highest rate since May
2009.
-The excess inventory of homes has put downward pressure on home prices. All else equal, in the market for homes, this means

A) demand should increase.
B) supply should decrease.
C) quantity demanded should increase.
D) quantity supplied should increase.