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Last Updated: Tuesday, 20 June 2006, 13:58 GMT 14:58 UK
Dry spell helps US house building
New homes being built in the US
Mortgage rates are expected to take their toll on house building
The number of new homes being built in the US grew by 5% in May after three months of declines.

The figure had been expected to remain relatively unchanged from April but demand for apartments and houses grew.

Analysts said an unusually dry spring had encouraged construction, leading to the annual rate of properties being built rising to 1.96 million units.

But they warned construction was likely to slow down as rising mortgage rates cooled the housing market.

Rates have been steadily increased by the US Federal Reserve as it tightens credit to control inflation.

Mixed picture

In an indication that slowdown is imminent, the number of permits given for new construction fell 2.1% in the month.

And on Monday the National Association of Home Builders had reported that confidence among its builders was at an 11-year low because the climbing mortgage rate made homes less affordable.

Commerce Department figures showed that in May construction of family homes rose 2.1% while the number of apartments and townhouses being built leapt 19.7% to an annual rate of 371,000 units.

The west of the country saw the biggest growth in construction activity, up 15.8% in May, but it fell by the same percentage in the Midwest.

Overall construction had dropped 5.5% in April, 7.5% in March and 5.9% in February.

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