In a fast changing market and while still single

ANALYZE THE STIMULUS:

Fact: Such uncertainties as fast changing market, single, and changing jobs discourage these young professionals from buying a home.
Fact: When settled with a spouse and a stable job, these young professionals generally choose to buy real estate.
Fact: Surprisingly, in cities where the industry and market are quite stable, young working professionals are still not buying, even though they are not changing jobs and may already be settled down in a spousal relationship.

Which of the following, if true, most helps to explain the surprising finding?

ANALYZE EACH ANSWER:

(A) Stable markets do not themselves entice working professionals to buy real estate rather than to rent it.
Wrong. Sounds tempting but incorrect. “Do not entice to buy more than to rent” means customers actually BUY real estates, but the number of homes sold do not overcome that of home rent. Thus, A does not help to explain why customers do NOT buy real estates.

(B) Brokers readily connect for-sale-homes with working professionals who have stable jobs and are in spousal relationships.
Wrong. Do not explain why customers do NOT buy real estates.

(C) The stability of industries varies widely from city to city.
Wrong. We do not talk about the range of variability. “Stable market” means “stable market”. That’s it. We do not care which city has industry more stable.

(D) A very expensive home can significantly decrease the ability of a working professional to fulfill his mortgage payments.
Wrong. We talk about real estate in general. “very expensive home” is just a sub-set of real estates. Thus, D does not help.

(E) Due to lending constraints, banks have increased the down payments required for consumers to obtain mortgages for new homes.
Correct. E shows the reason why consumers who have certain conditions cannot buy homes.

Hope it helps.

No where in the paragraph the real estate prices and young professionals income has been compared. So how can this be inferred that increasing down payments will cause the young professionals to not to buy new homes.
I eliminated options C, D and E after reading then and decided the best between A and B.

You have to evaluate each choice and see the question "Which of the following, if true, most helps to explain the surprising finding" Now, if you carefully analyze the answer choices, you may easily delete choice B, C, D.

Since choice B does not help to understand the surprise finding, infact it is working opposite that Brokers readily connect sale homes, so this choice cannot be the answer. I hope you are clear wih choice C and D.

Now to choose from Choice A and E :- first of all choice A only talks about stable market, it does not talk about stable job, which also a criteria for investment in real estate as per the argument. The choice A is not a better choice if you carefully read choice E.

Once again read the question. The question ask to find if any of the conditions are true, that satisfies why young working and married professional is not investing in real estate while they have both stable job. The choice informs a different condition, which informs if the down payment is increased, it would certainly be difficult for young working and married professional to defer their decision to invest in real estate.

You may put yourself in the example and think for solution, you may find choice E suits the best,

Hi,

But Passage doesn't say new home or old home ..... If their are lending constraint for new home ...young people can buy old homes .As their is no mention of only new home purchase ...Can any1 explain.

In a fast changing market and while still single, young working professionals often change jobs and switch job locations. Such uncertainty discourages these young professionals from buying a home. When settled with a spouse and a stable job, however, these young professionals generally choose to buy real estate. Surprisingly, in cities where the industry and market are quite stable, young working professionals are still not buying, even though they are not changing jobs and may already be settled down in a spousal relationship.
Which of the following, if true, most helps to explain the surprising finding?

here is my view on it:
Premise: Uncertainty discourages --->young professionals from buying a home.
A---- discourages----> B
or No A or less A ----> better B (Comparatively)
But conclusion says that even if uncertainty is not there (or less) ,B is still not better than before
Y?
Premise does not says only A ---discourage-->B, so their must be some other factor C, which can also discourage B.
Now we have to look for that other factor which can discourage young people from buying new home.


(A) Stable markets do not themselves entice working professionals to buy real estate rather than to rent it.
Ok, young professionals prefer to rent over buying real estate..... Hold it..
(B) Brokers readily connect for-sale-homes with working professionals who have stable jobs and are in spousal relationships. So what??? Out....
(C) The stability of industries varies widely from city to city. Out...
(D) A very expensive home can significantly decrease the ability of a working professional to fulfill his mortgage payments. It is true..but who said they can only buy expensive home..Out.
(E) Due to lending constraints, banks have increased the down payments required for consumers to obtain mortgages for new homes.
Ok...it looks on the track..Hold...

Now compare A and E,
A states professional preferred to rent over buying...
E says, Incresed down payments can discourage young professional to buy new homes (even if other uncertainties are not there).
that's what we were looking for....
E wins...

Thanks for posting, but we partly agree on this one buddy. For instance, you wrote:

"E says, Increased down payments can discourage young professional to buy new homes"

But this is not what answer (E) said. Actually, answer (E) referred to "consumers" in general:

"(E) Due to lending constraints, banks have increased the down payments required for consumers to obtain mortgages for new homes."

This is the reason I think that the correct answer is misleading. It refers to a general public, the consumers, but it wants the test-taker to think that it refers to young professionals. Consumers could pretty much refer to married couples as well, don't you think? Then, this wouldn't solve the paradox, because it doesn't explain one public (young professioanls) over the other (married couple).

Does it make sense?

No, this is another example of mislead by the argument:

"why young working and married professional is not investing in real estate while"

The paradox is about: Why young working professionals and married professionals adopt a different behavior when it should be the same? This is not explained when referreing to a generic consumer.

I marked E, but as I read the explanations above I think the question is somewhat ambiguous.

E states that "Due to lending constraints, banks have increased the down payments required for consumers to obtain mortgages for new homes"

Basically it means banks in both emerging and developed markets increase the down payment... so this will make it harder for young professionals in both markets, which contradicts what the essays says. That's why I chose A

Correct me if i'm wrong

I eliminated B and C and was stuck among A, D and E.

I agree that A means some young professionals are still buying homes and that D's expensive homes are just a subset.

This helped drive home E.

I don't agree with the question stem. Nowhere the correct answer choice addressees the issues specific to "such cities".

Lending Constrains that are a part of OA are nowhere mentioned in the Q.
To me, this seems just as likely as A.
Please help me understand.

Thanks in advance.

Hi gmat1393, GMATNinja, GMATNinjaTwo, nightblade354

I also picked A over E for same reason mentioned by dqtuan9627, Could you please advise if we both are following something different then what we need to.

GMATNinja VeritasKarishma

Option choice A vs E.

Why is A wrong? maybe they prefer to rent more than buying.

Why is A wrong??

Giving a try to explain what’s asked.
The question statement specifically asks about the present situation, which is of a stable city in terms of industry and market. That’s what Option E is about; the current, developed and stable, city banks. If those banks have changed their policies to lend money and have made it tough, one would not be able to buy a home even if he/she wants to.

I used POE because GMATNinja always says “We are not looking for one correct answer, but four incorrect answers”. But it took me 3 minutes to choose E over the rest 4. So, the joke’s on me.
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Hi,

I am getting your point but I eliminated E as it states bank have changed policies which makes difficult to buy new home but it does not state that they have made changes in policy only for people taking loan for developed and stable city. Hope you are getting my point.

Hi,
Indeed it does not. But does it need to? “Due to lending constraints, banks have increased the down payments required for consumers to obtain mortgages for new homes.”
If the banks have increased the down payments, it’d affect all. Whether the city/market is developed or not. Right?
Hope this helps.
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Found my mistake, thanks !!

There is 1 fact in the passage help to eliminate A from E is that Young professional with a wife and a stable job is going to settle down. That means there is another upcoming problem needs to be solved is mortgage

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