WASHINGTON - A weaker residential showing has contributed to a marked slowdown in the recovery of the overall real estate market, the Federal Deposit Insurance Corp. said Thursday.

The FDIC's latest survey of federal liquidators and examiners reflected the effects of rising interest rates on homebuying and construction.

The survey measures real estate conditions according to the proportion of respondents who see an improvement from the previous study period. This proportion in the residential market was the lowest in nearly four years.

"I think there is a very strong connection between the Federal Reserve's (interest rate) actions and the decline in the housing markets," said James Chessen, chief economist at the American Bankers Association. "That has to have an effect on the affordability of housing and the availability of credit."

Each quarter, the FDIC polls about 400 real estate market experts in the federal bank and thrift regulatory agencies. Scores are compiled for residential and commercial markets, as well as a composite covering both.

Making its third consecutive decline from a record high of 78 last April, the national composite score dropped again from 67 in October to 62, its worst reading in 2#1/2 years.

An index value over 50 indicates that more bank examiners and asset managers saw a market upturn rather than a downturn. The higher the figure is above 50, the greater the agreement about the positive state of the market.

The residential index slipped to 58, six points below where it was three months earlier, and commercial real estate declined by three points, to 68.

While 38% of those surveyed cited gains in commercial real estate activity - the lowest proportion in more than a year - the survey said that only about half of the respondents observed an excess supply in local markets. Two years ago, 84% of those surveyed said they saw a glut in their markets.

"Vacancy rates have fallen in several areas of the country, and the strength of the economy apparently has businesses looking for more floor space," said FDIC Chairman Ricki Tigert Helfer.

In the survey's regional breakdown, the weaker housing market assessments were concentrated in the Midwest. The proportion of those surveyed who said conditions improved during the prior three months plummeted from 40% in the October report to 22%.

Respondents in California reported the worst news for commercial real estate: More than three-quarters said commercial property sales were below average.

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