Housing Market Up; Inventory Down; No Inflation

The Housing Market Index increased by 2 points. National for-sale inventory remains at historic lows. And inflation is currently at a standstill, despite predictions of the drought spiking up food and energy prices.

The National Association of Home Builders reported on Wednesday that its Housing Market Index increased 2 points in August to 37. Though still below the optimism/pessimism threshold of 50, the gain builds on a six-point increase in July and brings the index to its highest level since February 2007, just as the housing bubble was beginning to painfully deflate.

Every component of the index posted gains. The components gauging current sales conditions and traffic of prospective buyers each rose three points, to 39 and 31, respectively, while the component tracking sales expectations in the next six months inched up one point to 44. All of the components were at their highest levels in more than five years.

“While there is still much room for improvement, we have come a long way from the depths of the recession and the outlook appears to be brightening,” said NAHB chairman Barry Rutenberg in a statement. “From the builder’s perspective, current sales conditions, sales prospects for the next six months and traffic of prospective buyers are all better than they have been in more than five years.”

Housing Inventories Declining

Perhaps the homebuilder are justified in their creeping optimism. Realtor.com reported lean for-sale housing inventories in its “July 2012 Real Estate Data,” which it released on Wednesday. The total U.S. for-sale inventory—including single-family homes, condos, townhomes and co-ops—remains at historic lows across the country, with 1.866 million units for sale in July, down 19.25 percent compared to a year ago and nearly 40 percent below the peak of 3.1 million units in September 2007, which is also when Realtor.com began tracking the markets.

The median age of the inventory of for-sale listings was 88 days in July 2012, slightly up from June (84 days), but 9.27 percent below the median age in July 2011, the company said. While the median age of an inventory varies a lot with the season, the year-over-year decline is consistent with other data showing improvement in market conditions compared to a year ago.

Inventory shrinkage is, in fact, widespread, according to Realtor.com. For sale inventories in July declined on an annual basis in all but two of the 146 MSAs monitored by the company, with for-sale inventory dropping 20 percent or more in 67 of the 146 markets covered. Eight out of 10 MSAs with the largest year-over-year declines in their for-sale inventories in July 2012 are in California.

Inflation Sputters to a Halt in July

The drought in the farm states might push up prices for food and energy and other needful things before long, but not yet. The Bureau of Labor Statistics reported that the CPI was virtually flat (0.0 percent, as the BLS put it) in July. The CPI less food and energy increased not more than: 0.1 percent, mainly because food was up and energy was down.

Inflation is one of the considerations that the Fed will take into account before deciding on whether to stimulate the economy or not in the near future. This is the last CPI report before the next meeting of the Federal Open Market Committee, which will be Sept. 12 and 13.

Wall Street had a case of the summer slows on Wednesday, ending mixed. The Dow Jones Industrial Average lost a mere 7.36 points, or 0.06 percent, while the S&P 500 and the Nasdaq gained 0.11 percent and 0.46 percent, respectively.