Answer: In this week's Torah portion we read how after Jacob's death, the brothers approached their brother Joseph saying that their father told them to tell Joseph that after his death he was to forgive them for selling Joseph years before. In the Torah we don't find any place where Jacob uttered these precise words. The Torah tells us that the reason that the brothers "lied" about their father's statement was in order to prevent recriminations by Joseph now that their father was dead.
The Talmud uses the story of Joseph and his brothers as a biblical precedent to teach that "one may change one's words for the sake of peace". It's important to note that the Talmud does not say that "one may lie for the sake of peace" but rather that "one may change one's words for the sake of peace". The implication being that an out-right lie, even for the sake of peace, is forbidden but a once-off ambiguous statement that can be construed as a partial truth is permitted - for the sake of peace.
The words of the brothers to Joseph, that Jacob had asked Joseph to forgive them, were also not an outright lie: The Torah relates how before Jacob passed away he told the brothers to gather together and listen to his blessings. Our rabbis tell us that when Jacob told all of his sons to "gather together" he didn't only mean to physically assemble so he could bless them but rather his intent was to subtly urge them to forgive each other for the past and "gather together" as one. It was therefore not an outright lie by the brothers to say to Joseph that their father had requested that he forgive them. They only "changed" the words of their father and spoke in an ambiguous manner by saying that he had told them to tell this to Joseph. The reason that they did this was to give strength to their words in order to insure that the peace with Joseph would be kept.
In a similar vein the Talmud teaches that the way in which one fulfils the mitzvah of making a bride happy is by saying that the "bride is beautiful and stunning". This applies to any bride regardless of what she actually looks like. The Talmud explains that this too is not an outright lie but rather an ambiguous statement because every bride, no matter how ugly, is beautiful in some way. Beauty need not reflect physical beauty but might mean one of beautiful character. In order not to hurt the feelings of another and especially in a case where ones ambiguity will make no tangible difference, it would be permitted to "change ones words" in such a way.
The above is by no means an outright permit to allow one to tell half-truths on a regular basis even in nonlegal situations, in fact our rabbis praise one who never makes use of this loophole at all. In your situation however, if you know that by telling your friend that his house is ugly it will definitely hurt his feelings and you have no other way to get around it, it would not be wrong to focus on the qualities and tell him somewhat ambiguously that he has a beautiful home.