INTEREST RATES HURT U.S. MAY HOUSING SALES
  Sales of new single-family homes
  tumbled 14.9 pct in May from April levels because of higher
  mortgage interest rates, analysts said.
      "There should be another month or two of very weak new home
  sales but with interest rates stabilizing, sale of new homes
  should become more stable by mid-summer," said economist
  Lawrence Chimerine of Wharton Econometrics Inc.
      The drop in May, to a seasonally adjusted annual rate of
  616,000 units, was the largest since January 1982, the Commerce
  Department said.
      Interest rates on conventional mortgages bottomed out at
  about 9.08 pct in March and rose to about 10.7 pct in April,
  according to Stephen Roach, economist at Morgan Stanley.
      The effect was to freeze some potential new homebuyers out
  of the market, he and others said.
      "The rates moved very suddenly and were certainly
  unexpected by homebuyers," said Cynthia Latta, an economist
  with Data Resources. "They were so startled, they wanted to
  hold back and see what would happen."
      The drop in sales of new single-family home sales was
  sharper than expected, some economists said. "We fully expected
  a decline but the extent was more than we anticipated," said
  James Christian, chief economist for the U.S. League of Savings
  Institutions.
      Christian said there was a sharp rise in May in sales of
  existing homes, which are generally less expensive than new
  homes.
      Latta of Data Resources said strong sales of new
  condominiums in the Northeast and on the West Coast were
  reflected in sales of existing but not new homes.
      Christian of the U.S. League of Savings Institutions said,
  "Underlying housing demand remains strong. I think the market
  is going to stabilize and give us a good second half."
      Others were less optimistic, however.
      "We clearly won't have a boom (in new home sales) but I
  don't think this is the start of a collapse in single-family
  housing," said Chimerine of Wharton.
      Eugene Sherman, chief economist of the Federal Home Loan
  Bank of New York, said, "The lower sales level will be
  maintained for awhile until there is another change in rates.
  There won't be much specific improvement in coming months."
  

