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Housing indicators signal a stall

Washington – The nation’s home builders reported a rise in housing starts, the Commerce Department reported today, but that was the lone positive measure in a slew of downward trends.

Housing starts climbed by 5.0% in May, reversing a three-month slide. But even with last month’s rise to a seasonally adjusted annual level of 1.96 million new homes, starts have still fallen a steep 13.8% from a 13-month high of 2.24 million units set in September. Starts have fallen 3.8% from the pace of May 2005.

The number of building permits filed by home builders is down by 8.5% from year-ago levels. A new canvass conducted by the National Association of Home Builders and mortgage lender Wells Fargo Bank shows builder confidence tumbled to its lowest level in more than 11 years, since April 1995, falling by 8.7% to a reading of 42.

Based on past experience of contractions in the housing market, David Seiders, chief economist of the builders’ trade group, said he expects new home sales to slide by 13% this year from their record levels of 2005. “Single-family starts, supported by large builder backlogs of unfilled orders and some continuing reconstruction in the wake of last year’s hurricanes, should be down by about 9% from the 2005 record,” Seiders said.

The decline was broad based, involving every region of the country, with the Northeast registering the biggest drop, six points to a level of 40. Confidence levels in the Midwest fell four points to a level of 25; by two points to 49 in the South; and by one point to 61 in the West.

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