July housing-market indicators signified that despite a slowdown in the market, it still remains very strong.

Seasonally adjusted housing starts declined 3% to 1.554 million units per year, while existing home sales posted a 3% increase to 5.23 million units per year, according to a PaineWebber report. Meanwhile, consumer confidence rose 4% to 141.7, slightly below the record January number. The homeownership rate reached a record high for the second quarter, rising to 67.2%, up from 67.1% in the first quarter, according to the U.S. Department of Housing and Urban Development.

However, to get an overall picture of how these numbers are affecting the market, it is best to look at them as a whole, rather than separately, according to Frank Nothaft, chief economist at Freddie Mac.

"We still have a relatively strong robust housing market, but nowhere near the exceptional levels that we saw in 1999," Nothaft said. "In terms of home sales, it was a record-breaking year. It's unrealistic to expect that every year we're going to be shattering the prior year's record."

Nothaft added that Freddie Mac had been predicting a slowdown in the housing market, but still remaining strong. He said three factors have figured in to these numbers.

The first is low mortgage rates. "We've seen 30-year fixed rate mortgages remain between 8% and 8.25% now for quite some time," he said.

Second, strong economic growth has boosted incomes. "When families' incomes are higher and their home balance sheet is strengthened, they're more in a position to buy houses, especially people who have been tenants are considering becoming first time home buyers," Nothaft said.

Thirdly, the high consumer confidence levels have made potential homeowners optimistic that they will be in a secure employment and financial situation, making them more likely to purchase big-ticket items.

"You've got the confluence of these three events which all work together to translate to a strong home sales market as well as a rise in the homeownership rate," Nothaft said.

Many Federal Reserve observers are now suggesting that despite a robust market, the economy is showing signs of slowing, which would suggest that an August interest-rate hike is not likely.

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