New-home construction spending rose in July to its highest level since September 2008, signaling a confidence in the housing recovery that -- for the time being -- defies increasing mortgage rates.
Spending on residential construction increased 0.6 percent to a seasonally adjusted annual rate of $334.58 billion, according to the Commerce Department. Spending overall, including commercial and public construction, also rose 0.6 percent -- the highest level since June 2009.
For the 12 months ending in July, construction spending increased 5.2 percent.
Could rising rates deflate confidence?
Consumer confidence in the housing recovery is boosting spending. But some analysts worry that if interest rates continue to rise, the recovery will stall because homes will become less affordable. So far, rates are still near historic lows but steadily increasing. The benchmark 30-year fixed-rate mortgage rose to 4.72 percent from 4.62 percent last week, according to the Bankrate.com national survey of large lenders. A year ago, the rate was 3.79 percent.
The news on home sales in July was mixed. Sales of existing homes rose 6.5 percent, while purchases of new homes dropped by 13.4 percent. The pace of existing home sales is considered the more important number to watch because it comprises a much larger share of the market.
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