More families may soon be on their way to homeownership as July Housing Starts hit their highest level in five months. Meanwhile, consumer inflation remained tame.
July Housing Starts rose 2.1 percent from June to an annual rate of 1.21 million units, above the 1.167 million expected. The sector continues to be a bright spot in a muddling along economy. The 1.21 million is the second-highest Housing Starts rate since the recession, and multifamily units are leading the increase. Building Permits fell 0.1 percent from June to an annual rate of 1.152 million, in line with expectations. These figures should be welcome news to potential homebuyers, especially those in areas that have struggled with a limited supply of homes.
Consumer inflation remained tame in July because of low energy costs. The Consumer Price Index (CPI) was unchanged from June to July, as expected. Core CPI, which strips out volatile food and energy, rose 0.1 percent, just below the 0.2 percent expected. The Core rate rose 2.2 percent on an annual basis, just below the 2.3 percent recorded in June. Inflation reduces the value of fixed investments, like Mortgage Bonds. This means tame inflation tends to be good news for home loan rates, since they are tied to Mortgage Bonds.
Inflation is also one of the many economic factors the Federal Open Market Committee (FOMC) considers when setting monetary policy. The recent release of the July FOMC meeting minutes did not provide any clear signal regarding when the Fed may next change the Fed Funds Rate. This is the rate banks use to lend money to one another overnight. September provides the next opportunity for the Fed to consider an adjustment.
For those looking to invest in a home right now, home loan rates remain in historically low territory.
