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The housing market continues its belated recovery. First, there was the report last week of a nice jump in building permits in July, even as housing starts inched a bit lower on a month-to-month basis. Then, yesterday, the National Association of Realtors, a key trade group, reported that sales of existing homes had picked up last month, rising against both the June tally and the year-earlier metric. Now, just within the hour, the U.S. Commerce Department has reported that new home sales perked up in July, rising to an annualized rate of 372,000 homes, up from an upwardly revised June total of 359,000 homes. Initially, the June estimated sales rate had been 350,000.

Although the improvement, which matched the 2012 high of 372,000 homes sold in May, was incremental, the year-to-year gain was sizable, at 25.3%, as just 297,000 homes had been sold on an annual basis in July of 2011.

The gain for the latest month also beat expectations, which had been for 360,000 homes to be sold, and thus kept up the momentum noted in building permits and sales of existing homes. Even starts, albeit off slightly on a month-to-month basis, were up sharply on a year-to-year matchup in July. Individual publicly traded builders are also seeing better results, as the industry continues to crawl out of its deep multi-year hole.

To wit, after peaking at a 1.4 million annual rate in 2005, the industry tumbled for a half dozen years, finally troughing in 2011. One of the contributing factors to the now-fairly steady recovery in housing has been the sharp drop in the number of homes available for sale. In all, inventories of unsold properties totaled just 142,000 in July. That was the lowest total on record and equated to just a 4.6 month supply. A supply of some six months is considered to be healthy. Given the paucity of home available for sale, there is a good chance that volume will continue to trend higher in the months to come. That does not mean that there may not be some month-to-month wrinkles along the way, as there is with most any economic series. But the overall trend is likely to be higher. Low mortgage rates, some uptick in prices, and the paucity of supply are the main reasons for our cautious optimism going forward.

At the time of this article's writing, the author did not have positions in any of the companies mentioned.