The federal government reported yesterday that the construction of new homes rose in May, bouncing back from a disappointing April.

The Department of Housing and Urban Development said new construction rose 5 percent in May, to a seasonally adjusted annual pace of 1,957,000 homes. The stock market had little reaction to the report. The rate was 2.1 percent lower than in April and down 8.5 percent from a year earlier.

Taken with other signs of slower growth in housing - like a record number of unsold new homes on the market and a darkening financial outlook among builders - the new construction numbers point to an overall slowdown from the boom of the last few years, economists said.

The government report hurt the stock values of some of the largest home-construction companies.  Shares of Toll Brothers, the largest builder of luxury homes, and D. R. Horton, the largest home building company, both posted losses. Other large home builders - the Centex Corporation, Pulte Homes and the Lennar Corporation - were also down for the day.

Since the beginning of the year, the Bloomberg United States homebuilders index, which includes the largest construction companies, has fallen nearly 30 percent. The rise in new construction last month was helped by the continuing surge of building in the West, where new construction jumped 15.8 percent from April's levels. The building rate in the South also posted an 8.5 percent gain from April.

The report also showed strong growth in the construction of apartments, a sign that high interest rates are beginning to affect the housing market. Yesterday's housing report was the latest to suggest a slowdown.

By M. Sese
http://realestatepress.org