In a report released today by the Commerce Department new home sales increased a respectable 12.4 percent to a seasonally adjusted number of 654,000 units. That’s considerably higher than whatTarget Inflation Rate analysts expected as investors thought something closer to 580,000 new homes would be sold for the month of July. We’ll get a picture of existing home sales tomorrow when those numbers are released at 10:00 AM EST. This increase in new home sales surprised most every analyst and indicates a backlog of new homes as well as an increase in demand.  The June numbers were revised downward slightly to 582,000. This same time last year, the 654,000 new homes represent an increase of just over 31 percent.

 

An increase in home equity as the housing market finally gets its sea-legs back is helping push the drive for new housing and if confirmed tomorrow with existing home sales this does portend a recovering economy, albeit one that not many feel. This has been a recent trend over the past few months as economic data is pointing to a better economy as inflation still seems to be held at bay. That puts the Fed in a bit of a quandary as the economy appears to build a bit of steam yet there is no inflation in sight. With little or no inflation, the Fed might sit on the sidelines a little longer. Yet with a tepid recovery, the fear might be that a rate boost could quell any momentum.

The feeling is even if the economy is indeed standing on two legs it’s not exactly pounding its chest. Economic reports show progress yet it’s marginal and thus no real excitement in multiple sectors. Real estate investors stand to gain on this uncertainty and low rate environment as rates continue to stay low. Even with a 0.25% rate bump sometimes this year, rates are still close to historical lows.