Elasticity of Demand for New Home Sales

The Commerce Department reported that new home sales increased 4.6% from April to May this year. At the same time, the price of new home sales fell 4.3%. In terms of a simple supply and demand model for new home sales, the combination of rising sales and falling prices could best be explained as a rightward shift in the supply curve. Thus, assuming a stationary demand curve, we can estimate the price elasticity of demand for new home sales as

Does this make the demand elastic or inelastic? What factors would make the demand for new homes more elastic than the above number would suggest?