Thursday, July 17, 2003

Put these two bits of information together and you get a not-so-rosy story after all.

The Commerce Department reported Thursday that housing construction rose 3.7 percent from May to a seasonally adjusted annual rate of 1.80 million units, the highest level since January. June's performance, stronger than the 1.75 million pace that economists were predicting, offered a fresh sign that the housing and residential construction markets continue to serve as one of the national economy's few pillars of support.
Mortgage rates rose for the fourth consecutive week after reaching a record low in mid-June, stoking fears that the resilient housing market could begin to slow, Freddie Mac said on Thursday. Thirty-year mortgage rates averaged 5.67 percent in the week, compared with 5.52 percent the previous week. It marked the fourth consecutive weekly increase since the 30-year mortgages hit 5.21 percent for two weeks in June, its lowest on record.
So what do we have here? New housing starts hit their second-highest level of the year in June just as mortgage rates ended their long decline. Recall that for two weeks in mid-June, the 30-year mortgage hit its trough of 5.21%. Clearly Americans saw the writing on the wall and jumped into the housing market before it was too late to benefit from mortgage rates they might never see again in their lifetimes.

The upshot? The June housing figures are a fluke, a product of the end of the fall in mortgage rates, not of a rebounding US economy. Look for very meager numbers for July.

So the Associated Press can spin the numbers all they want. This "pillar of support" for the American economy has taken all the weight it can bear and will take no more.


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