Mortgage Rate Rise Portends Housing Slump

Despite dry weather, housing construction only partially rebounded in June from the sharp slump in May, and economists say rising mortgage rates likely will curtail home building for the rest of the year.

The Commerce Department said today that builders started construction of new houses and apartments at a seasonally adjusted annual rate of 1.45 million units in June, up 5.1% from the previous month.

But the improvement only partly offset a precipitous 12.6% decline in May.

“The June numbers are just a technical correction. They don’t really signal a rebound in housing,” said Thomas M. Holloway, senior economist of the Mortgage Bankers Assn. of America.

The hot, dry weather of June, bad for farming but ideal for home building, also contributed to the upswing.

And, mortgage interest rates, which had climbed by three-quarters of a percentage point from post-stock crash lows in early March, eased slightly in June, falling by nearly a quarter of a percentage point.

However, interest rates have begun edging up again in July .