Hopes that new housing construction will boost the economy might be short-lived as permits for new home building look pretty limp.

In revised July data, building permits edged higher by 0.1% to 1,443 million, according to the U.S. Census Bureau. It's a hefty 13% slide from July last year that mirrors the subdued trend evident in recent months.

Permits were just a touch higher than the preliminary July estimate of 1.442 million indicated.

Initially, economists had expected July permits to climb to 1.463 million, so both the preliminary and actual for July fell short of forecasts.

Of July's total of 1.443 million new building permits, 930,000 were for single-family units. That was slightly ahead of 924,000 in June and much better than the 918,000 from last July.

Dragging down the total was a steep drop in permits for buildings containing 2 to 4 units, which fell by 5,000 to 47,000 from June.

Permits for buildings with 5 or more units were steady from the previous month at 466,000 but dramatically down from 700,000 permits in July last year.

Mixed signals for the economy

After a week of robust economic data, including evidence of a tight labor market and strong retail sales, flat building permits paint something of a grimmer picture.

The culprit behind the hold-up may be mortgage rates.

A rally in the bond market has pulled mortgage rates to the highest level in over two decades. The typical 30-year mortgage rate is now close to 7.5%.

In response, loan application volume cratered 4.2% in the previous week, according to the Mortgage Bankers Association (link down 4.2%)

"The outlook for the housing market will remain depressed. It is still seeing the impact of the bond market rally with interest rates very much elevated," said Edward Moya, Senior Market Analyst at OANDA

"That will keep homebuying and investment into residential property depressed," he said.

Higher rates are unlikely next month

With Jackson Hole taking place this week and a decision on interest rates due next month, the burning question is: Will the Fed opt for another rate hike?

Even though some parts of inflation are above the Fed's liking, Moya thinks a September hike is unlikely.

"The Fed is not going to cut rates at the September meeting," he said. "They will try and convince the market that they might hike at the following meeting in November but I think that is still unlikely."