The latest rise in housing starts may be deceptive.

All regions of the country reported increases in residential construction and permits issued last month. But the increase in starts, 5.7% in July, was merely a break-even rebound from the 5.6% decrease the month before.

Moreover, mortgage applications are down, indicating that building activity is likely to slow for the remainder of the year.

The Mortgage Bankers Association said total applications fell 3.3% in the week ended Aug. 13. Compared with the same week last year, applications dropped 26%. Applications for refinancings dipped 2.8% last week as well.

Though rates came down from the previous week's average of 8.15%, to 7.93% for last week, they are still a far cry from the 30-year fixed-rate average of 6.92% a year earlier.

Charlie Ruma, president of the National Association of Home Builders, attributed the fluctuating housing market to builders playing catch-up on projects that were delayed by shortages of key materials and skilled labor. He added that some permits obtained in June were not actually used, which may account for the decline in starts that month and the increase in July when construction finally got under way.

But the housing industry -- separate from the mortgage industry -- is certainly not facing a dark second half of 1999. Builders of single-family homes set a fourth consecutive record in the second quarter by recording 358,166 permits, according to U.S. Housing Markets, a newsletter based in Canton, Mich.

The number of permits issued is generally indicative of the number of houses that will be built in the succeeding months.

This is particularly true in a seller's environment, where homes are not built on speculation in large quantities. The home builders association is forecasting that this year's single-family permits will reach a record 1,276,700, which would be a 7.5% increase from 1998.

But the association's director of forecasting, Stan Duobinis, said sales have been declining despite the rise in starts. He agreed with Mr. Ruma's assertion that shortages of certain supplies and workers were factors in the slowdown.

"I have had builders tell me they will pay to relocate people because they are so desperate for construction crews," Mr. Duobinis said. "You can't find a bad construction area in the country -- all construction.

Things like road building and nonresidential construction are up, and they need the same electricians and equipment operators."

Mr. Duobinis said a downdraft in traffic and construction activity is expected for the second half of the year because builders are starting on houses they had sold "much later than they wanted because they have to wait on materials and a crew. It's a tremendous problem."

The fastest-growing markets, as reported by U.S. Housing Markets, continue to be retirement and resort destinations.

The research newsletter identified Naples, Fort Myers, and Orlando in Florida; Myrtle Beach, Raleigh-Durham, and Charlotte in the Carolinas; Atlanta; Phoenix; and Las Vegas as hot markets, all building at least 15 new housing units per 1,000 people.

The group said Colorado is continuing speedy growth, with the Denver, Greeley, Boulder, Fort Collins, and Grand Junction areas all exceeding a score of 12 on its market hotness index. The U.S. average is 6.1.

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