Many of the area’s home builders are starting 2014 just like they finished 2013…pushing prices to the limit. Builders have been busy tinkering with prices on new homes, and adjusting them higher during the first week of the year, apparently oblivious to the recent spike in interest rates. During much of 2013 Katy TX home builders were watching there inventory get snatched up at a rapid pace as they struggled to keep inventory on the ground. Their leverage was increased by the fact that there was little in the way of resale inventory to compete with. 2014 is poised to bring a shift toward a more balanced market. With home prices already pushing up against their upper limit, builders are likely going to find the market for new homes in Katy TX to be a bit more challenging. The 10-yr Treasury started the year off above 3%, and higher mortgage rates have certainly put a dent in home affordability. It will be interesting to see if builders can still be greedy without sinking their sales. If recent data from the major builders is any indication, the first quarter of 2014 should be a wake-up call for the home builders that new home prices have gone too far too fast. Without a corresponding increase in incomes, home prices will be pushing up against a wall. The Fed’s latest data from the American Economics Association meetings in Philadelphia reflects this reality.