Residential Starts Reach Eight Year High In July

WASHINGTON, DC—Residential startsincreased by 0.2 percent month over month to 1.21 million in July, according to the joint report by the US Census Bureau and Department of Housing and Urban Development. It is a significant increase -- the most since October 2007, and exceeded the forecast of economists surveyed by Bloomberg.

Specifically, the government reports that privately-owned housing starts in July reached a seasonally adjusted annual rate of 1,206,000--0.2% above the revised June estimate of 1,204,000 and 10.1% above the July 2014 rate of 1,095,000.

Single-family housing starts in July reached 782,000; this is 12.8% above the revised June figure of 6 93,000. The July rate for units in buildings with five units or more was 413,000.

A discordant note in the report was the drop in building permits, which suggest that growth will slow in the coming period. Privately-owned housing units authorized by building permits in July 1,119,000-- 16.3% below the revised June rate of 1,337,000, but 7.5% above the July 2014 estimate of 1,041,000.

Single-family authorizations in July were 679,000; this is 1.9% below the revised June figure of 692,000. Authorizations of units in buildings with five units or more reached 412,000 in July.

Of course these metrics will be added to the stew of figures the Federal Reserve Bank is considering as the countdown to the expected interest rate increase in September continues. While many do believe it is a done deal, there is still room for debate.

On Monday, for example, former Fed Gov. Larry Lindsey told CNBC that the Federal Reserve may have missed its window for an interest rate hike. He dismisses the current theory that there will be an economic pop at the end of this year. "I think if anything we're going to have a deceleration."

That, however, as stated above, was yesterday. Today's data point suggests differently. Or maybe not.

Another View of the Housing Starts

Indeed, not everyone is wowed by the housing starts figures. Lindsey M. Piegza, chief economist at Stifel Fixed Income, is distinctly unimpressed. The annual rate of starts have changed little, she noted in an alert on the numbers, despite the lauded near eight-year high, and according to her calculations they came in lower than expected. 

Meanwhile that drop in housing permits more than exceeded expectations by all accounts. "With surmounting weakness in housing permits in particular, momentum in the housing production pipeline appears to be slowing noticeably as we look further out into the second half of the year," she writes. As for what the Fed may be considering -- or perhaps should be -- "rising rates, even a minimal increase, can create an undue burden to potential homebuyers further reducing expected activity for the latter portion of 2015 and beyond," Piegza writes.