Housing starts
New residential construction decreased 5.0% in August to an annualized rate of 571,000 units. Both single and multi-family starts declined in August. Single family housing starts fell 1.4% to 417,000 while multi-family starts fell 13.5% to 1540,000 units. Over the year total starts are down 5.8%. Building permits for new homes increased 3.2% to 620,000 in August and is 7.8% above the August 2010 estimate of 575,000.  Housing completions decreased 2.7% in August to an annual rate of 623,000 from 640,000. The housing market remains extremely weak and we continue to expect limited improvement this year.

Existing home sales
Existing home sales rose 7.7% in August to 5.03 million annualized units from 4.67 million in July. Over the year sales are up 18.6%. The inventory of unsold homes decreased 3.0% to 3,577,000 from 3,686,000 in July. At the current sales rate the months’ supply is 8.5, down from 9.5 in July. Median home prices fell 1.7% to $168,300 from $171,200 in July. Over the past year prices are down 5.1%. Sales of existing homes remain weak and there is little positive momentum at this point.

Federal Open Market Committee monetary policy
The FOMC kept the federal funds rate at a range between 0% and 0.25% at its latest meeting in light of weaker than expected growth. The Fed maintained its pledge to keep the federal funds rate at its current level through mid-2013. The Fed cited the soft labor market, the depressed housing market, and low rates of resource utilization, in its decision to keep rates at their current levels.  The big news at the current meeting was the announcement of a new round of stimulus via the so-called “Operation Twist.” The new securities program will not affect the size of the Fed’s balance sheet but will affect its composition. The Fed will buy approximately $400 billion of Treasury debt with maturities of 6-10 years and will finance the purchases with sales of shorter-termed assets. The announcement has already lowered yields on long-term rates, though we expect any stimulus to be minor.