The Census Bureau reported that new home sales fell 1.2% year-over-year in August. As we saw last week with the existing home sales decline, Hurricane Harvey put a damper on real estate transactions in the southern states. It is quite likely that September home sales will also be affected by the fallout from Harvey.

The median price of a new home contracted in August was $300,200 during the month of August. The average price of a new home contracted last month was $368,100. Both figures represent price increases from a year ago. Median new home prices in the Dallas area have prices in the Dallas area have eclipsed $350,000, and average prices are even higher. With recent home price inflation, the challenge for new home builders continues to be bringing affordable product to market. This is probably why several new home builders in the Dallas area are experimenting with lower-priced new home options to attract millennials and other first-time buyers.

Whether it is D.R. Horton’s Express Homes, Gehan’s Gray Point Homes or Ashton Woods’ new Starlight Homes, these products are a response to the growing challenge to build a quality new home that Americans can actually afford to buy. Make no mistake, this is something builders are being forced to do as home prices extend beyond the reach of many buyers. Real incomes have simply not kept pace with home price inflation during the last five years, and that is certainly the case if you are talking about major metro markets in Texas like the DFW metroplex. The new echo bubble in housing is real, and builders are now being forced to deal with it as best they can…

New and Existing Home Sales

Declining mortgage interest rates provided some lift to new home sales during the first half of 2017. It will be interesting to see how new home sales fare for the remainder of the year with the Fed still jawboning about higher rates and a “normalization” of their massive balance sheet.Fannie Mae’s third quarter 2017 Mortgage Lender Sentiment Survey shows that lenders are under mounting pressure to loosen their mortgage standards.

New Home Sales vs Rates