The housing market, which has been recovering nicely thus far this year, with few exceptions, kept up the beat in July, with gains recorded in both housing starts and building permits. But the improvement was not quite as strong as had been forecast.

Specifically, housing starts rose to an annualized rate of some 896,000 homes in July; that was a bit under the estimated total of 910,000 homes. Meanwhile, the June tally, initially estimated at 836,000 homes on an annualized basis, was revised to 846,000 homes. Both months, though, saw less building than in May, when an estimated 919,000 homes were started. However, compared with a year ago, the recovery is flying ahead, as the July 2012 starts total was just 741,000.

At the same time, building permits, a more forward-looking metric, came in last month at an annualized rate of 943,000 homes. That was negligibly under the consensus forecast of 945,000, but it was notably better than the unchanged June estimated total of 918,000 building permits. In May, the level had been up at 985,000 homes. However, in July of 2012, permits had been taken out on just 839,000 homes. Here, as well, the year-to-year gains have been stellar.

Breaking the report down, meanwhile, we found that starts rose last month in three of the four regions of the country. To wit, starts surged in the Northeast by 40.2% last month, while they gained 25.4% in the Midwest, but a lesser 7.2% in the West. However, the largest area of the country, the South, saw a 7.0% drop last month. The South accounts for almost 40% of the nation's total of new homes built. Meantime, permits rose in all regions, albeit nominally, save for the West, where they climbed by 7.1%.

Finally, housing completions, a lagging indicator, pushed higher in July versus June, and were up sharply from July of last year. Taken as a whole, this was a decent report, but not an especially strong one, suggesting that perhaps the higher mortgage rates now in effect, relative to several months back, are starting to have an effect. We shall see. Recent action in the bond market, where rates have been climbing, most notably in the area of the 10-year Treasury note, upon which mortgage rates are based, indicate that borrowing costs on a home will head higher still.      

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