Housing Sector's Rebound Continued in May

NEW YORK -- The recovery in the U.S. housing sector continued in May, but with a flattening in new construction that economists attributed to higher mortgage rates.

Housing starts rose to an annual rate of 982,000, 0.1% ahead of the revised April figure of 981,000, which in turn was 8.2% higher than in the previous month, the government reported Tuesday.

The back-to-back monthly increases were the first since June and July 1989, the Commerce Department said.

Still, starts remain "at a very weak level," said Ian Borsook, senior economist at Merrill Lynch Capital Markets. He predicted that starts would rise to 1.3 million this year.

Building permits also rose in May, by 7.2%. The jump in permits indicates that the housing turnaround is continuing, but economists cautioned that a sharp rise in permits does not always translate into a big increase in housing starts in months ahead.

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