On a positive note, construction of new homes rose in July at the fastest pace since the recession. Housing starts ticked up .2% to an annual rate of 1.21 million, the fastest since October 2007. The gain was led by a 12.8% rise in single-family home starts. At the same time, however, following three straight months of sizable gains, permits for future building dropped 16.3% to an annual rate of 1.12 million. According to the NAHB, “Our builders are reporting more confidence in the market, and are stepping up production of single-family homes as a result. However, builders are still reporting problems accessing land and labor.”
Confidence among home builders rose to a near ten-year high in August, with the NAHB Housing Market Index reaching 61 – the highest since November 2005. Measures of buyer traffic and current sales conditions rose, while a measure of sales expectations held steady. “Today’s report is consistent with our forecast for a gradual strengthening of the single-family housing sector in 2015. Job and economic gains should keep the market moving forward at a modest pace throughout the rest of the year,” according to the NAHB.
In further news out of the housing market, existing home sales jumped 2% in July, rising for the third straight month and reaching an annual rate of 5.59 million, and holding at the fastest pace since February 2007. However, the percent share of first-time buyers slipped for the second consecutive month, impacted by low inventories and rising prices. According to the National Association of Realtors, “Despite the strong growth in sales since this spring, declining affordability could begin to slowly dampen demand. Realtors in some markets reported slower foot traffic in July in part because of low inventory and concerns about the continued rise in home prices without commensurate income gains.” With 2.24 million existing homes available, inventory stands at a 4.8 month supply at the current sales pace.
Inflation slowed in July on the biggest drop in airfares in two decades, with consumer prices edging up .1%. Food prices rose .2%, energy prices rose .1% and housing costs rose .4% (the largest gain since 2007). Even though inflation was muted, July marks the sixth straight monthly increase.
On a negative note, an index of manufacturing activity in the New York area plunged to a negative 14.9 in August, the lowest since April 2009, according to the New York Fed. A measure of new orders dropped to a negative 15.7 and a gauge of shipments fell to a negative 13.8.
In more upbeat news, that was contrasted by a measure of business conditions in the Philadelphia region, which showed that conditions firmed up in August. Gauges of shipments and employment both picked up.