Housing Start Rate Sees Best Reading in Six Months

Construction of new single-family homes rose to a seasonally adjusted rate of 401,000 units in May, the best reading in six months and a sign that the homebuilding sector may have hit bottom this spring and is now showing tentative signs of a recovery. May starts rose 7.5% from April but compared to the same month last year fell 41%. All housing starts (including multifamily) rose to a seasonally adjusted rate of 532,000 units, a 17% jump from April but a 45% decline from May 2008. New construction for single-family units was strongest in the South (rising 10.6%) but weakest in the Northeast, which suffered a 12.5% sequential decline. Even though May's construction numbers are a hopeful sign, housing and mortgage executives are concerned that rising interest rates could snuff out the momentum. In trading Tuesday, most homebuilder stocks were flat or down slightly after some initial appreciation.