Housing starts rebounded 2.6 percent in May despite higher mortgage rates, the government reports, but the growth came entirely from construction of new apartments.
Single-family starts, which represent about 80 percent of housing construction, slipped and many analysts expect higher rates to keep this sector flat or even down slightly during the remainder of the year."The single-family sector is the bulk of the industry and really reflects the health of the housing sector," said economist David Lereah of the Mortgage Bankers Association. "We're starting to see it taper off."
Building activity rose in both the South and West, although it fell in the Northeast and Midwest.
Starts nationally totaled 1.51 million at a seasonably adjusted annual rate, up from a revised 1.47 million in April, the Commerce Department said. The initial April estimate was 1.46 million.
Starts for the first five months of 1994 were 21.1 percent higher than during the same period last year. Starts totaled 1.29 million in 1993 and many analysts still expect them to climb to nearly 1.40 million this year.
Builders had boosted construction by 14.4 percent, to 1.52 million, in March as they attempted to regain losses suffered during the severe winter.
Many analysts attributed the 3.1 percent drop in starts in April to rising mortgage rates, which averaged 8.32 percent, compared with 6.74 percent last October, a 25-year low.
Mortgages continued to climb, reaching 8.77 percent by May 12, highest since 8.84 percent in May 1992. But they had fallen back to 8.25 percent by last week.
Single-family starts slipped 0.5 percent, to a 1.20 million rate. But apartment construction shot up 16.7 percent, to a 308,000 rate.