US Housing Starts up in May

US housing starts rose more than expected in May. The rebound came from a 13-month low. Builders have been actively working on backlogs and using incentives to win new business.

Despite a slowing market, housing starts were up 5% to an annual rate of 1.957 million, according to the Commerce Department on Wednesday.

However, building permits were down 2.1%. Permits are a sign of future construction.

Despite the growth, the market remains in a state of slowdown. The growth may reassure investors and Fed policy makers that the slowdown is gradual and stabilizing.

Both Atlanta Fed President Jack Guynn and Dallas Fed President Richard Fisher have predicted a moderate softening in the housing market.

There'ss no question housing is slowing down, but it'ss no falling off a cliff, said Ken Mayland, president of ClearView Economics LLC. This May level is a more accurate reflection of what'ss really going on in housing than what we saw in April.

The annual rate for May is still below the 1.972 million pace recorded in March. Last year'ss monthly average was 2.073 million units.

Building permits were expected to fall to a 1.95 million pace for May. They averaged an annual monthly rate of 2.16 million units in 2005.

Stock-index futures rose after the report, while treasuries were little changed.

Starts for single-family homes increased 2.1% in May. Construction of multifamily homes was up 20%.

Three regions saw increased starts. The West saw an increase of 16%, the South saw 8.5% and the Northeast saw 1.7%. The Midwest experienced a 16% drop in starts.

The number of homes under construction increased 0.6% in May. Housing completions fell by 8.0% for the month.

Confidence among US homebuilders is at a 11-year low this month, according to The National Association of Home Builders and Wells Fargo'ss index of builder confidence.

The Mortgage Bankers Association has forecasted a 6.7% decline in housing starts this year and a 7.6% decline in home sales.

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