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Housing starts slide
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June 16, 2000: 8:56 a.m. ET
May starts decline 3.9% to 1.59M annual rate, lowest in almost a year
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NEW YORK (CNNfn) - U.S. builders began construction on new homes at the slowest rate in almost a year in May, while the number of new permits issued to builders fell to its lowest in more than 2-1/2 years -- more signs that the red-hot housing market is feeling the effects of higher interest rates.
 Housing starts across the United States fell 3.9 percent last month to a 1.59 million unit annual rate, below the 1.62 million-unit rate expected by economists and April's revised 1.6 percent gain to a 1.66 million unit rate. That was the lowest monthly number since June 1999. Building permits declined to a 1.49 million unit annual rate, the lowest since December 1997.
The numbers were in line with other recent indicators showing that the U.S. economy, now in its 10th year of uninterrupted expansion, may be starting to respond to the Federal Reserve's series of interest rate increases designed to slow growth and keep inflation in check. Everything from new job creation to manufacturing output to retail sales has tapered off recently.
"It looks like we're finally beginning to see signs of a sustained slowdown, particularly in the interest-rate sensitive areas such as housing," said David Kaslow, a markets analyst with Banc of America Capital Management in St. Louis. "This is more evidence for the Fed that the economy is slowing."
Jury still out on Fed
The Fed has raised short-term rates six times in the past year -- most recently a half-point hike May 16 -- to slow the economy and keep inflation from accelerating. Fed officials next meet June 27-28 to debate monetary policy and decide whether rates should continue to go higher.
 Many analysts and economists now expect that, with signs of slowing, the Fed will hold off raising rates again in June. At the same time, Wayne Ayers, chief economist with Fleet Boston, told CNNfn's Before Hours that the slowdown may be only temporary, and that the Fed may end up raising rates again in the latter half of the year. (450KB WAV) (450KB AIFF)
Starts on single-family homes fell 5.4 percent last month to a 1.250 million annual rate, the lowest level since 1.248 million units in April 1999. May starts of multi-family homes rose 2.1 percent to a 342,000 rate, following a 10.6 percent rise the previous month, Commerce said.
By region, starts fell 13.6 percent in the West and 8.9 percent in the Midwest last month. New construction rose 5.6 percent in the Northeast, and 2.8 percent in the South. 
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