The Census Bureau reported a 7.6 percent decline for new home sales compared the election-year surprise we saw for July. Compared to August of last year, new home sales were still 20.6 percent higher than last year. It appears super low mortgage rates continued to provide some lift to the new home market. What did not rise in the latest Census report is the median price of a new home contracted in August. The median price of a new home fell to $284,000, down from $300,200 last year. The average price of a new home contracted in August stood at $353,600.

The new home market has seen a much-needed lift this summer, and the support has been provided by generous year-over-year mortgage rates and rising inventory levels in some areas. The real test remains as to whether new home demand will remain intact when interest rates finally start to rise. For now it appears the Fed has managed to keep the housing market stitched together at least long enough to get us through the November election.


New home builders will always control their inventory levels, so a better metric to follow is the actual inventory all listed homes in any given market. The latest MLS data through September 19 2016 shows that the Houston area does NOT have an inventory shortage. What Houston does have is a large supply of luxury homes and a limited amount of affordable starter homes. For price ranges of $350,000 or above Houston now has more than six months of supply in ALL of those higher price bands. This is why we continue to see top-down compression in terms of pricing for local single-family homes. For the $500,000-$599,999 price segment, Houston has 8.7 months of supply, and the inventory grows larger as you climb up the price scale. The growing inventory of local homes set the stage for a record high in August sales volume, that along with record low mortgage rates.

If you are in the market for a new home, keep in mind that this top-down compression on local home prices will likely continue until oil prices show a sustainable recovery above $50.