Why Home Prices Refuse to Fall as Sales Hit a Two-Year Low

San Antonio has been my adopted home for close to 40 years now. I’ve watched it grow through more than one boom cycle, but recent Redfin data suggests we could be looking at a bust.

In July, the sixth largest U.S. city p osted the steepest drop in home sales of any major metro. Sales fell 12.6% from the same month last year. Just 2,333 homes changed hands, down from 2,669.

At the same time, the median sale price in San Antonio went up. It rose 3.3% to $320,243.

According to economics 101, prices aren’t supposed to rise when demand falls off a cliff. And this isn’t a San Antonio quirk. It’s happening across the country, and the reason why says more about Washington than it does about housing.

A Buyer’s Market with No Buyers

Let’s zoom out a bit. U.S. home sales fell 4.1% in July to their lowest level in almost two years. New single-family home sales dropped 10.5% to an annualized 607,000 units, the weakest since January. Meanwhile, the 30-year mortgage sits at around 6.7%.

Redfin counted over 966,000 buyers in the market in July, the lowest number on record, against nearly 1.5 million sellers. That’s nearly half a million more people trying to sell than buy.

On paper, this is the strongest buyer’s market in a generation.

And yet the median U.S. sales price just hit $407,730, a record for any July. The FHFA House Price Index has prices up a little over 2% year-over-year. A family earning the median income of $106,800 now needs 34% of it just to cover the mortgage on a median-priced new home.

So Why Won’t Prices Break?

Prices aren’t coming down because, simply put, supply is getting choked off faster than demand is falling.

Single-family housing starts dropped 10% in July to an annualized 808,000 units, the lowest since November 2022 and down 15.7% from a year ago. Builder sentiment has been stuck at 35 on the NAHB/Wells Fargo Housing Market Index for more than two years running, with 50 marking the line between optimism and pessimism. Thirty-five percent of builders cut prices in August, by an average of 6%, and 63% are leaning on incentives to move product.

This tells me they can’t build any cheaper, so they’ve decided to build less.

When you look at rising input costs, you understand why. Producer prices for construction companies rose more than 7% in the 12 months ended July 2026. Liquid asphalt was up an eye-watering 45%. Aluminum mill shapes were up around 40%, steel mill products 22%, coper and brass 18%. Lumber and plywood jumped nearly 10%, the sharpest increase since March 2022.

The Tariff Bill at the Lumberyard

The Wall Street Journal’s editorial page recently laid out the arithmetic behind the higher input costs. In short, American companies are paying 75% more for aluminum than the rest of the world right now.

Why? Because the metals tariffs are stacked on top of the existing China tariffs.

Part of these taxes go to the U.S. Treasury, obviously. The rest went to producers that no longer have to compete with foreign metal. Over the past year, shares of steelmaker Nucor gained 66%, Steel Dynamics 74%, Century Aluminum 98%, ArcelorMittal 117%.

Meanwhile, the S&P Homebuilders Index, which tracks the companies buying that steel and aluminum, is down about 7% over the same period.

Tariffs didn’t destroy value so much as they relocated it. Money flowed out of the homebuilders—and the families buying from them—and into the share prices of domestic metal producers.

If you owned the right end of that trade, you did very well. On the other hand, if you were trying to buy a starter home in Texas, you ended up paying for it.

Don’t Wait on a Rate Cut to Save Housing

It doesn’t help that mortgage rates are headed in the wrong direction right now. Thirty-year Treasury yields are near their highest since 2007, with the 10-year around levels last seen at the start of the current administration. Investors are looking at record federal debt of $40 trillion and asking whether anyone is seriously committed to getting inflation back to 2%.

U.S. Bank’s economists point out that while much of the economy has adapted to higher borrowing costs, housing has not. “Meaningful relief for affordability will likely require lower long-term Treasury yields, slower home price appreciate or some combination of both,” the firm’s economic research group wrote.

New Fed Chair Kevin Warsh has abandoned forward guidance and has told investors to read market signals instead of central bank press releases. Say what you will about this communications style. The man is telling you the truth about where the power actually sits.

The Math Has Stopped Working for First-Time Buyers

The household side of this is thinner than the headline economy suggests. Real disposable income growth has trailed real spending for 24 consecutive months, the longest run since the 1960s, according to the Kobeissi Letter.

Meanwhile, the savings rate has slide to 2.7%, near the lowest level in history, and HELOC balances—or home equity lines of credit—just posted their 17th straight quarterly increase, to $459 billion. That’s the highest amount since the end of 2017.

When people start borrowing against their house to afford groceries, that’s worth paying attention to.

The affordability math has gotten a little absurd at the entry level. Renting now beats buying in all 50 of the largest U.S. metros, with the average buy-versus-rent gap at $858 per month. Here in Texas, Austin’s gap runs a jaw-dropping 139%.

According to Zillow, a household saving 10% of median income now needs 8.5 years to reach a 20% down payment. They need a further 6.2 years before owning pulls ahead of renting.

Housing isn’t broken because Americans stopped wanting homes. It’s stuck because the cost of building one keeps rising for reasons that have nothing to do with lumber demand or buyer appetite. The solution everyone’s waiting on runs through the bond and appropriations process rather than the Fed, which is a slower road than most investors have priced in.

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Originally Posted August 31, 2026 – Why Home Prices Refuse to Fall as Sales Hit a Two-Year Low

None of U.S. Global Investors Funds held any of the securities mentioned in this article as of 06/30/2026.

The FHFA House Price Index is a public economic tool that tracks average price changes for single-family homes in the United States. The NAHB/Wells Fargo Housing Market Index (HMI) is a monthly survey that measures the confidence and sentiment of single-family home builders regarding market conditions. The S&P Homebuilders Select Industry Index is a stock market benchmark that tracks the performance of publicly traded companies involved in homebuilding and related housing industries in the United States. The Producer Price Index (PPI) measures the average change over time in the selling prices received by domestic producers for their output.