
                         THE VIRGINIAN-PILOT
                 Copyright (c) 1994, Landmark Communications, Inc.

DATE: FRIDAY, June 17, 1994                    TAG: 9406170538 
SECTION: BUSINESS                     PAGE: D2    EDITION: FINAL  
SOURCE: BY JOHN D. MCCLAIN, ASSOCIATED PRESS 
DATELINE: 940617                                 LENGTH: WASHINGTON

HOME BUILDING FELL AGAIN IN MAY \

{LEAD} Builders cut construction of single-family houses in May for the second straight month, reflecting their increased apprehension over a slowdown in home sales due to rising interest rates.

Many analysts said higher rates will curb activity for the rest of the year, although they predict single-family housing starts in 1994 will total more than in '93.

{REST} ``The single-family sector is the bulk of the industry and . . . we're starting to see it taper off,'' said economist David Lereah of the Mortgage Bankers Association.

``We're seeing a general drift down in single-family starts,'' agreed economist Stan Duobinis of the National Association of Home Builders. ``Interest rates are moderating a little now, which certainly will keep the decline from being overwhelming, but we will see a continued decrease.''

The Commerce Department said Thursday that overall housing starts rose 2.6 percent in May, to a seasonally adjusted 1.51 million annual rate. Increases in the South and West offset declines in the Northeast and Midwest.

But the growth was entirely in apartment buildings.

Single-family starts, which represent 80 percent of housing construction and are most affected by mortgage rate changes, slipped 0.5 percent, to a 1.20 million rate. They had fallen 5 percent in April, to 1.21 million.

And although multi-family starts jumped 16.7 percent, to a 308,000 rate, many analysts said the increase was unsustainable and said construction would fall in June.

Despite the drop in the single-family sector, housing starts for the first five months of 1994 were 21.1 percent higher than a year earlier.

The Labor Department also reported Thursday the number of Americans filing first-time claims for unemployment benefits fell by 11,000 last week to a seasonally adjusted 348,000, lowest in nearly two months.

The decline was expected by most economists, who say the job market is improving although at a slower rate than earlier in the year.

The reports were the latest signs of a slowing economy after four interest rate increases engineered by the Federal Reserve to head off any inflationary pressures.

The home builders say a rate increase from 7 percent to 8 percent would boost the monthly payments on a $100,000 mortgage by $68.

Rates reached 8.77 percent by May 12, highest since 8.84 percent in May 1992. Although they had fallen to 8.25 percent by last week, the Federal Home Loan Mortgage Corp. reported Thursday they had inched back up to 8.33 percent this week.

{KEYWORDS} CONSTRUCTION by CNB