📊 GMAT Exam Prep

Despite a record number of new housing starts in the last quarter, the average price of homes continues to rise dramatically. Which of the following, if true, best helps to resolve the apparent paradox?

A Construction costs for new homes have increased significantly due to material shortages.
B A large percentage of the new housing starts are luxury homes, not affordable housing.
C Interest rates for home loans have recently been at historical lows.
D Many potential buyers are waiting for prices to stabilize before purchasing a home.

✓ Correct Answer: Option B

If most new homes are luxury units, they won't alleviate the demand for standard housing, allowing average prices to keep rising for the majority of the market, thus resolving the paradox.

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