The health of the housing sector is undoubtedly one of the most important drivers of the economy. And this is particularly true right now, as the nation continues to recover from the housing-induced financial crisis.

This morning, the Commerce Department released its first of three major reports on the housing market for the month of July. This release, covering various phases of the construction process, showed that the overall picture improved last month, though all of the growth came in the multi-family market -- that is, structures containing more than a single unit.

All three of the metrics covered in the report experienced growth last month. Building permits increased by 2.7% over June to come in at 943,000, or 12.4% higher than the same month last year. Housing starts were up sequentially by 14.5% to 896,000, or 12.9% higher relative to July 2012. And housing completions improved compared to June by 12.9% to 774,000, equating to a 17.9% uptick on a year-over-year basis.


anImage

While this is unquestionably good news, as you can see in the chart above, the one downside was the performance of the single-family housing market, which saw both permits and housing starts fall compared to the previous month. As The Wall Street Journal noted, "U.S. home building rose in July on a sharp rise in apartment construction, but a pullback in construction of single-family homes underscored the risk of higher mortgage rates restraining housing demand."

Over the last few months, I've discussed the potential impact of fluctuating mortgage rates on the housing market on multiple occasions. Immediately following the initial spike in rates at the end of May, it looked as if the trend may paradoxically spur the housing market, as it freed up the mortgage pipelines at major lenders like Wells Fargo and Bank of America to focus on purchase-money mortgages.

By contrast, today's data suggests just the opposite. As an analyst quoted by the Journal wrote in a note to clients, "Today's report shows that the recent spike in mortgage rates is indeed slowing the housing market."

At the end of the day, it's still too early to conclude what the ultimate impact will be. Yet, by the looks of housing stocks today, one can't help but wonder whether or not the latter opinion has merit. At the time of writing, shares of many of the nation's largest homebuilders are rallying. Shares of Beazer Homes are leading the way, up by 6%, followed by PulteGroup's 3.8% advance, and D.R. Horton's 2.6% move.

The price of becoming the world's greatest investor is that Warren Buffett can no longer make many of types of investments that made him rich in the first place. Find out about one such opportunity in "The Stock Buffett Wishes He Could Buy." The free report details a sector of the economy Buffett's heavily invested in right now and exactly why he can't buy one attractive company in that sector. Click here to keep reading. 

The article Housing's Mixed Signals originally appeared on Fool.com.

John Maxfield owns shares of Bank of America. The Motley Fool recommends Bank of America and Wells Fargo. The Motley Fool owns shares of Bank of America and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


Increase your money and finance knowledge from home

What is Short Selling?

Make a profit when stocks prices fall.

View Course »

Forex for Beginners

Learn about trading currencies and foreign exchange transactions

View Course »

Add a Comment

*0 / 3000 Character Maximum