It is obvious that a contrast exists and I figured out the answer, but it seems like expensive and reasonable would also work. Could you explain?

Matt, expensive and reasonable sound like good choices, but as you pointed out, dilapidated and high provide a better contrast.

I disagree, you would expect a beach town to be nice and expensive, I think the greater contrast would be nice houses that are affordable. Please a bit more explanation. Thank you.

Caitlin, in standardized tests, we are expected to answer the problem with the given information, and minimize injecting our own assumption into the problem.

Your assumption may not be valid. For example, here in Northern California / San Francisco Bay Area, near the ocean there are many expensive homes that are dilapidated. They are expensive because of their ocean views and the surging demand from tech millionaires, but the buildings are from the 1950s. On the other hand, in Miami and other beach areas since the housing bust there are many nice houses that are not that expensive, because the owners left them after they couldn't afford the mortgage payment anymore.

I'm not sure I buy your argument. It seems reasonable to think that providing the reader with the information that the town is a small, beach town is somehow relevant. There is no inherent association between beach towns and dilapidated buildings (as I can attest, having been raised in one), but even if it is not always the case, expensiveness is frequently a property of small-town beachfront property: consider Palm Beach or Martha's Vineyard. Your examples may illustrate that this is not always the case, although Miami and San Francisco are not small towns, anyway. But given what people know about small beach towns, it seems more reasonable to select the expensive/reasonable pair in this context.

I got it wrong too, but when you think of it in economic terms, how can a building looks expensive ( its looks, decoration etc), in a beach town, and small ( little supply) can be in reasonable value? High demand, low supply is one reason. Another, if the building looks expensive, owner must pay a lot in decoration, meaning it's popular town with a lot of tourist, can it be cheap in value?
of course we cannot think that much, but the answer makes more sense than the expensive/reasonable pair

For those who struggled between the seemingly equally satisfying contrasting choices of expensive/reasonable and dilapidated/high, I would say that dilapidated/high works best for one very important reason: while buildings may be expensive or dilapidated, it is odd to think of a street as being expensive. It makes more sense to say that buildings and streets are dilapidated than to say that buildings and streets are expensive.