New US homes see decline in May

The US housing market has been slowing in recent months

The number of new US homes built in May fell more than many analysts expected, according to official figures.

The Commerce Department said that the number of new homes built dropped by 2.1% in May, after rising 1% in April.

However, while construction fell to 1.47m units there are signs that the sector could be picking up as new home permits rose to 1.5m in May.

The mixed picture comes after data on Monday implied the housing sector was at its weakest in more than 16 years.

More stable

One of the main brakes on the housing market has been higher interest rates that have boosted the cost of mortgage payments.

Another factor that has dampened the market has been higher fuel prices, which have eaten into household budgets and act in very much the same way as a tax on consumers.

Analysts said that the latest Commerce Department figures confirmed an overall picture that the US housing market remained sluggish.

Analyst Kurt Karl of Swiss Re said that the market seemed "to have bottomed out on the housing starts".

Looking ahead he said the housing market looked "neutral".