Wolf’s Finance World

Chinese carmaker Beijing Automotive Industry Holding Co plans to present a detailed bid for General Motors Corp’s Opel unit in the next few days, the Wall Street Journal reported, citing a person familiar with the matter.

Beijing Automotive held discussions with GM last week and is firming up details of an offer, the paper said.

Beijing Automotive currently makes Mercedes-Benz and Accent cars at joint ventures with Daimler AG and South Korea’s Hyundai Motor.

General Motors has been talking to other potential buyers for Opel as it worked through snags with preferred bidder Canadian-Austrian auto parts group Magna International payday loan lenders.

On Tuesday, a GM Europe spokesman confirmed that potential buyers for the business included Belgium-based holding company RHJ International and Beijing Automotive.

Beijing Automotive could not be immediately reached for a comment by Reuters.

(Reporting by Hezron Selvi in Bangalore; editing by John Stonestreet)

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Investing in guaranteed investment certificates, or GICs, has been the safe choice ever since registered retirement savings plans became available in 1957.

But investment professionals say stocks are vital for enhancing returns for long-term investors.

So which has been better – a GIC-only approach, or a mix of stocks and bonds?

Let’s answer the question by analyzing the experience of hypothetical savers Mary, John and David, who will turn 65 this year.

Mary was the GIC saver. Thanks to high interest rates relative to cost-of-living increases, she was able to build a sizeable retirement nest egg while playing it safe.

She did nearly as well as John after his investments took a beating in the latest stock market collapse. David did substantially better, simply by paying lower fees than John.

Unfortunately for today’s young adults, they will not do nearly as well as Mary, unless things change radically.

They will have to ride the market roller coaster and be miserly about fees for investment management and trading fees. Otherwise, they will have little hope of stretching their savings as far as today’s older parents.

All of the savers were equally diligent. They invested once every year from age 25, stepping up their annual savings in line with increased prices. So they started at $685 at the start of 1970, and increased the amount to $4,005 by this year.

Mary accumulated $352,429.

Her savings earned an average interest rate of 7.7 per cent, and as much as 15.8 per cent in 1982. Part of that high interest rate was due to higher price inflation than today. But she beat Canada’s cost-of-living increases by an average of 3 percentage points a year.

Things have changed. Over the past five years, GICs with a five-year term have paid an average of less than 3 per cent a year. They only beat inflation in the first year of the term by an average of only 0.7 percentage points.

If that same small margin between the interest rate and inflation were to persist for the next 40 years, a saver would have to set aside the equivalent of about $7,600 a year to do as well as Mary.

Her peers, John and David, went a different route. They invested in a mix of Canadian and U.S. stocks, long-term government bonds and short-term treasury bills.

They put the most into U.S. stocks that the foreign investment rules of the day would permit, then stopped at 30 per cent of their portfolio, despite the removal of limits in 2002.

Each year, they rebalanced their portfolios to keep no more than 55 per cent invested in the stock market, 40 per cent in bonds and 5 per cent in treasury bills car insurance and quote. These ratios are roughly in line with the average balanced mutual fund, according to Morningstar Canada data.

John and David were equally skilled or lucky, hypothetically speaking, that is. They would have matched the performance of major stock, bond and treasury bill indices if not for fees they paid by investing in funds.

John bought the more expensive funds. His fees lopped 2 percentage points off his annual returns, which is less than the fees charged by 84 per cent of balanced mutual funds in Canada.

David bought lower-cost funds. His fees took off only 0.7 percentage points. That is somewhat less than the 0.84 per cent with a balanced fund from TD Canada Trust that also tracks the performance of major market indices. The fees are also in line with some mid-sized pension funds.

If they had paid no fees, John and David would have accumulated about $593,500 in the time it took Mary to accumulate $352,429, up to the end of May this year. They would have had more than $630,000 if they had missed last year’s market collapse.

But John’s fees trimmed his ultimate nest egg to $362,687, putting him only about $10,000 ahead of Mary. David did much better, accumulating $498,255.

So what’s the lesson?

First, fees matter a great deal.

Second, while a stock-filled portfolio may provide higher returns, that comes with risk. A GIC-only portfolio may not be exciting, but investors sleep well at night.

What does the future hold? With interest rates so low, GICs are unlikely to provide decent returns for years. Stocks may be a tempting alternative, but their risks are as big as ever.

Today’s investors have a choice of thousands of mutual funds and, from life insurers, segregated funds. Only a few dozen also existed in 1970, and it’s unlikely any would have some of the same investors. They certainly have not had the same managers.

The best of two balanced funds for which Morningstar has calendar-year returns has been the AGF Balanced Fund.

Its average annual returns since the start of 1970 were higher than Mary would have earned from GICs. Yet, when we combined her pattern of savings with its pattern of gains and losses, she would not have done as well. Instead of more than $350,000, she would have had less than $213,000.

The one good thing that’s still true about GICs is they never have years of negative returns.

jdaw@thestar.ca

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MOSCOW–Russian lender Sberbank warned Friday that a deal to buy Opel with Canada's Magna International Inc. could still fall through as a deadline to move ahead with the deal looms, news reports said.

Asked if the deal could collapse, Sberbank executive Denis Bugrov said that he "did not exclude the possibility," Russian news agencies reported. He was speaking at the bank's annual meeting in Moscow.

Magna and Sberbank are reportedly expected to agree by July 15 whether to to push ahead with the deal to buy a majority stake in Opel from U.S. General Motors Corp. after signing a non-binding agreement last month.

The plan envisages Sberbank taking a 35 per cent stake and Magna a 20 per cent stake. GM, which is restructuring under bankruptcy court protection, would retain 35 per cent of Opel and 10 per cent would go to Opel employees.

The deal was courted in Russia as a major coup for the country's troubled carmaking industry – based on signals that Magna would produce Opel cars in Russia.

But negotations have reportedly snagged over what shape the deal will take recently while rival outside bidders could still bid for the company before a preliminary agreement is signed in July paydayloans.com.

German Gref, Sberbank's chief executive, said Friday the deal could be signed by September at the earliest.

"The new conditions have to satisfy the bank and the Russian Federation," Gref said, according to RIA-Novosti news agency. "If the conditions suit us, then we can close this deal."

German officials have stressed that the deal for Magna and Sberbank to rescue Opel is preliminary and have said that, until a final agreement is nailed down, other potential suitors could at least theoretically still be in play.

German Economy Minister Karl-Theodor zu Guttenberg was quoted as telling the Tagesspiegel daily Friday that in view of Opel's financial situation "it's urgently necessary to find a sustainable solution in the summer."

"Alongside the Magna consortium, the Chinese automaker BAIC and financial investor Ripplewood among others are still interested," Guttenberg told the Tagesspiegel.

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Dealmakers saw business pick up again in the second quarter as they helped companies raise cash in capital markets, but lucrative mergers and acquisitions (M&A) languished.

Worldwide combined capital markets and M&A fees rose for the first time in a year, Thomson Reuters data showed on Friday, up 29 percent from the first quarter, with share sales — such as rights offerings — the most buoyant.

“There’s a shift away from banks being the sole capital source for growth. There are fewer banks in the world and they have less money,” David Fass, head of global banking at Deutsche Bank, told Reuters.

Banks are hesitant to lend after the credit crunch depleted their treasure chests, and cash-hungry companies are instead selling bonds and shares to rebuild their balance sheets, refinance maturing debt, or expand.

The year has seen mammoth bond sales to fund mergers, with Pfizer Inc raising more than $23 billion for its purchase of Wyeth, after Roche sold $30 billion in bonds to help buy Genentech.

Banks have embarked on massive rights issues to refill their coffers, with HSBC’s $19 billion share sale in April topping the table of large deals, the second-largest rights issue of all time, according to the data.

“Markets for capital raising have been extremely active, you have seen equity balance sheet repair for the financial sector and increasingly the corporate sector,” Enrico Bombieri, head of European investment banking at JP Morgan Chase & Co, said at a media briefing this month faxless payday loan.

JP Morgan benefited most from the surge in capital market transactions, topping first-half global league tables in equity capital markets, bonds and syndicated loans.

From underwriting 166 equity issues, the bank earned an estimated $1 billion in fees.

NO MORE LOANS

Global mergers and acquisitions saw the steepest decline since 2001, the data showed, dropping 44.5 percent in the first half of the year from the year-ago period, with companies wary to take on more risk and funding scarce.

Morgan Stanley took the lead in both global and U.S. M&A advisory work, edging aside Goldman Sachs Group Inc in the first half of the year.

Part of the weak deal flow is that banks can no longer support these deals with loans, scared that the recession will cause more bad loans and further toxic assets may come to light, prompting them to reduce their debt levels.

Significantly, syndicated loans — traditionally the first point of call for acquisition funding in Europe — all but dried up, hitting their lowest volume in 13 years and dropping 58 percent from the year-ago period.

“Europe has traditionally been a bank-financed market … fundamentally we’re seeing a shift away from the loan market to the capital markets,” Viswas Raghavan, JP Morgan head of international capital markets, said at the briefing. 

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Plans to demolish the vacant San Luis apartments moved ahead after the Archdiocese of St. Louis overcame objections to replacement of the 11-story Central West End structure with a parking lot.

Dan Jay, managing partner of Christner, the architecture firm that designed the lot, said demolition could be ready to begin in about two weeks, after a contractor is hired and utilities are cut.

Razing the building became more likely Monday night, when the St. Louis Preservation Board voted 3-2 to pre-approve a demolition proposal and the conversion to a parking lot on the building’s site at 4483 Lindell Boulevard.

Jay told the board the archdiocese needs more parking for the Cathedral Basilica and Rosati-Kain High School.
Jeff Mansell, executive director of the Landmarks Association of St. Louis, said the board’s vote "obviously wasn’t a good sign for the future of the San Luis." He said the building-preservation group had not decided whether to contest the board’s decision health insurance for self employed.

Mansell was among 20 people who had urged the board during a four-hour hearing to deny any request to demolish the building. Fans said the San Luis, opened in 1963 as the De-Ville Hotel, is an excellent example of mid-century modern architecture. Replacing it with a parking lot would wreck the Lindell streetscape, they said.

The archdiocese bought the San Luis in 1973 and operated it as low-income senior housing before closing it in 2007.

Jay told the board the building is in poor shape and unsuitable for renovation. Among its many problems are rusted hangers that hold exterior concrete panels to the structure’s frame, he said.

Alderwoman Lyda Krewson, whose ward includes the site, told the board she reluctantly supports the parking lot plan.

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Toyota Motor Corp confirmed Akio Toyoda as its new president on Tuesday, promoting the grandson of the company’s founder to guide the world’s No.1 automaker through the worst downturn in its history.

Toyoda, 53, and a new management team that includes four new executive vice presidents and eight new board members, will need to hit the ground running with the company facing tanking car sales and a record loss for the year to March.

The industry slump, fueled by tight credit, volatile fuel prices and rising jobless numbers, has already helped drive U.S. rivals General Motors and Chrysler into bankruptcy.

“We expect to face continued hardship in our business environment for the near term, despite signs of recovery in some areas,” outgoing President Katsuaki Watanabe told Toyota’s annual shareholders’ meeting, adding that the company would try to achieve deeper cost cuts than planned.

“We are sorry to have worried our shareholders,” he said.

At a board meeting following the shareholders’ meeting, Watanabe was confirmed as vice chairman along with the other management changes including the promotion of Toyoda.

Toyoda had long been seen as a candidate to head the company founded by his grandfather in 1937 as he rose through the ranks at nearly twice the speed as his predecessor.

Supporting Toyoda will be five vice presidents while two key company elders, Honorary Chairman Shoichiro Toyoda — Akio’s father — and Senior Adviser Hiroshi Okuda, resigned from the board. Eight new officials joined the 29-member board.

In a move seen as an attempt to balance the newly promoted with seasoned veterans, Toyota brought back Yoshimi Inaba, an outspoken heavyweight who left as executive vice president in 2007 to head an airport that Toyota helped build no teletrack cash advance.

Inaba returns as a director and will take charge of Toyota’s North American operations, the company’s largest and, until recently most profitable market. Inaba, fluent in English, headed Toyota Motor Sales U.S.A., the California-based sales arm, from 1999 to 2003.

Takeshi Uchiyamada, chief engineer of the first-generation Prius, will remain in his role as executive vice president, switching his responsibilities to R&D and product management from manufacturing. Uchiyamada was among those who pushed for Toyota’s new Mississippi plant, which is now on hold as the automaker struggles to fill unused capacity elsewhere.

Senior managing directors Yukitoshi Funo, Atsushi Niimi, Shinichi Sasaki and Yoichiro Ichimaru will be promoted to executive vice president.

Funo, formerly head of operations in the Americas, will be in charge of emerging markets such as China, Latin America and the Middle East.

Niimi will head manufacturing, Sasaki will be responsible for purchasing and quality, and Ichimaru will head Japan sales, administration and finance issues.

Toyoda and his new management team are scheduled to hold a news conference in Tokyo on Thursday.

(Reporting by Nobuhiro Kubo and Chang-Ran Kim; Editing by Lincoln Feast)

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Emerging markets are like those giant slices of double-mud chocolate-brownie cake offered to you by restaurant servers at the end of your meal.

You run the risk of a severe stomachache later, but they sound so good it’s hard to resist.

This year, emerging markets mutual funds are up an enticing 54 percent, according to Lipper Inc. That indicates developing nations have the capacity to survive global economic trauma and investors are regaining an appetite for risk.

Here’s the stomachache: For the 12-month period that included the initial global economic panic, they’re still down 28 percent.

"Emerging markets have rebounded better than anywhere else and are a really hot area, with investment flows into emerging market mutual funds really strong," said Alec Young, international equity strategist with Standard & Poor’s Corp. in New York. "Just don’t forget this is a volatile area in which individual investors are often late to the party."

In some cases, emerging market countries have acted more grown-up and less panicked than their established rivals.

"We’ve seen that emerging countries have become much better in managing their own finances and the macroeconomic environment," said Patricia Ribeiro, portfolio manager since 2006 of the $469 million American Century Emerging Markets Investors Fund in New York, up 28 percent this year. "We didn’t see any major meltdowns in which any emerging market countries had to devalue their currencies because they couldn’t defend them."

In the 1980s and 1990s, emerging markets would implode on most any type of world stress, Ribeiro said. It is also a positive sign that more of these nations’ citizens are investing in their own markets. Although the economic environment remains difficult, she is convinced the most significant growth in the next two years will be in developing countries.

"Today, to have a diversified portfolio, you must look at emerging markets," Ribeiro said.

China, India, Brazil and Russia are the biggest country allocations in her fund. China’s stimulus package has proven effective; India has lowered interest rates and targeted infrastructure improvements; and Brazil, driven more by domestic than global factors, has created mechanisms to make lending easier, she noted. Russia is riskier because it is so dependent on oil prices and has a lot of debt.

Ribeiro’s top stock holdings include South Korea’s Samsung Electronics and Hyundai Motor Co.; Brazilian oil and gas company Petrobras and industrial materials company Vale; hardware maker Taiwan Semiconductor Manufacturing; and Israel’s Teva Pharmaceutical Inc.

"Emerging markets are going to come out of the recession before we do," predicted Gary Gordon, president of Pacific Park Financial in Aliso Viejo, Calif. "For example, a ‘bad’ year for China is 7 to 8 percent growth, and its stimulus package is $600 billion with 75 percent going toward infrastructure unique business cards."

The U.S., Japan and the developed nations of Europe are likely to be the last to emerge from recession, Gordon said. And while major world markets hit multiyear lows in March, emerging markets hit their lows in November.

The best way to invest in emerging markets, Young believes, is a broad-based index available through either an exchange-traded fund or a mutual fund, with plenty of choices available in each. For example, the Vanguard Emerging Markets ETF tracks performance of nearly 800 stocks of companies in emerging markets. Vanguard Emerging Markets Stock Index Fund is a comparable mutual fund.

"We endorse the idea of choosing an index over an actively traded emerging markets fund to invest in emerging markets," Young said. "That’s because the more exotic an asset class, the higher the expense ratios can go for actively managed funds, making it difficult to beat its benchmark index."

Only a small portion of an individual’s portfolio should be dedicated to emerging markets, he said. For example, S&P’s "moderate risk" model portfolio of 60 percent stocks and 40 percent fixed income includes 5 percent of the stock portion in emerging markets.

Emerging markets ETFs that look good to Gordon include:

— iShares FTSE/Xinhua China 25 Index, which consists of 25 of the largest and most liquid Chinese companies.

— Claymore/AlphaShares China Small Cap, which tracks the AlphaShares China Small Cap Index that monitors publicly traded mainland China small-capitalization companies.

— Market Vector Brazil Small Cap, which focuses on some of the smaller companies in that country and takes advantage of its strong consumer base.

— iShares MSCI Emerging Markets Index that covers a broad mix of emerging markets around the globe.

For obvious reasons, a single-country ETF carries greater potential risk than one that spreads risk around among many different countries.

Check your holdings to see whether you might already have adequate emerging markets coverage. Morningstar Inc. calculated that most foreign large-cap funds have 8 percent to 13 percent of their assets invested in the developing world. Emerging markets holdings are frequently found in diversified stock funds.

"Since you have to protect against downside risk, don’t buy an emerging markets investment and hold for a decade," Gordon said. "If you see it has made 80 percent over the past two years, maybe take a little profit off it, since holding forever is definitely not the way to go with this group."

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More than one-quarter of American states now have unemployment rates higher than 10 percent, and all but two saw a further job-market deterioration in May.

Tennessee and Indiana joined the rank of states, now 13, that have jobless rates exceeding 10 percent, and eight states - - including California, Florida and Georgia — reached their highest level of joblessness in May since records began in 1976, the Labor Department reported today in Washington.

The figures make it likely President Barack Obama, whose home state of Illinois also passed 10 percent for the first time since 1983, was correct this week in forecasting the national unemployment rate will reach that level this year. With no region escaping the rout, consumers across the country will probably curtail their spending, preventing any boom out of the deepest recession in half a century, analysts said.

“It’s tough everywhere,” said Mark Vitner, a senior economist at Wachovia Corp. in Charlotte, North Carolina. “Nobody’s really been spared.” The biggest increases in unemployment will be in states most dependent on manufacturing, construction and financial services, he said.

For the country, “unless hiring magically picks up, a 10 percent unemployment rate is pretty much baked in,” Vitner said.

Jump in Michigan

Michigan’s jobless rate, at 14.1 percent, showed the biggest jump from April and remained the highest in the nation. The bankruptcy of General Motors Corp. and Chrysler LLC is likely to deepen the labor-market slump in the Midwest and ripple through other areas and industries.

Kentucky and Florida were the other two states that passed the 10 percent mark last month. Those remaining on the list included California, Ohio, Oregon, Rhode Island, Nevada and North and South Carolina.

Overall, 48 states and the District of Columbia posted increases in their unemployment rates in May from the prior month. Nebraska was the only one to post a drop, to 4 no teletrack payday loans.4 percent from 4.5 percent; Vermont held at 7.3 percent, the Labor Department said.

Payrolls decreased in 12 states in May, led by California with a 68,900 loss, and Florida, where 61,000 workers were dismissed. North Dakota and Alaska reported gains in employment.

Six Million

Nationwide, payrolls fell by 345,000 in May after a 504,000 decline in April, government figures showed earlier this month. The economy has lost 6 million jobs since the recession began in December 2007. The jobless rate reached a 25-year high of 9.4 percent last month.

“It’s different times,” said Stephanie Moyna-Gilbert, a 36-year-old mother of three from Fishers, Indiana. “This is absolutely the longest time I’ve been unemployed.”

She lost her job as a recruiter and human-resource manager for Interactive Intelligence Inc., an Indianapolis-based telephone software maker, in December, and is finding it hard to find a full-time position for herself after four years of hiring and training staff.

Moyna-Gilbert is doing some consulting work to expand her professional contacts and try to bring home some cash. Still, “the income isn’t there until I place people,” she said. “Being without benefits isn’t a good thing.”

Employers remain reluctant to hire even as there are signs that the worst of the job cuts are over. A Bloomberg News survey this month showed economists project the jobless rate will reach 10 percent by year-end and average almost that rate in 2010.

Obama, in a June 16 interview with Bloomberg News, said he couldn’t predict when unemployment will start to decline because it was a “lagging indicator.”

“As soon as this economy has stabilized, we want the market to do what it does best, and that is produce jobs, invest,” he said.

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Chancellor Angela Merkel’s coalition voted through a law to curb manager pay at public companies in Germany, riling executives with a package of measures that goes beyond proposals in the U.S. or Britain.

The law includes steps to give supervisory boards more power to set salaries and financial penalties for executives who are found guilty of negligence. The government said the aim is to make compensation more transparent and geared to a company’s long-term interests; executives said politicians should stay out of corporate management.

“Mrs. Merkel should have empowered shareholders to determine pay,” Anton Boerner, president of the Berlin-based BGA exporters group, said in an interview. “The door’s been opened to lawmakers to meddle in the intricacies of boardroom pay-setting.”

Merkel’s Christian Democrats and the Social Democrats, coalition partners and rivals at Sept. 27 national elections, have been working on the legislation since the beginning of 2008. They’ve tightened the proposed clamps on pay as the financial and economic crisis has unfolded, sending Germany’s benchmark DAX down 29 percent in the past 12 months.

“It’s not about envy or an emotional overreaction to the current crisis,” Joachim Poss, Social Democratic finance spokesman, told parliament in Berlin yesterday before the vote. “This is about the kind of society we want to live in and how the product of combined efforts in our companies is to be distributed.”

Share Options, Fines

The law extends the period after which share options can be exercised to four years from two and requires that bonus payments be spread over the life-cycle of investments. Managers found liable for negligence by a court face fines equivalent to a minimum of 18 months pay, according to parliament’s daily bulletin.

That goes further than the U.S. or U.K., where proposals are focused on efforts to curb pay and bonuses at financial institutions bailed out with public money.

In the U.S., Treasury Secretary Timothy Geithner announced plans June 10 to require companies that got aid through the Troubled Asset Relief Program to give shareholders a non-binding vote on pay, without setting limits.

In Britain, the government ordered its Financial Services Authority to evaluate banks’ pay policies and consider whether some institutions should be required to maintain higher levels of capital to compensate for risks incurred by bonus awards.

Fred Goodwin

The U.K. steps were announced amid political pressure over former Royal Bank of Scotland Group Plc Chief Executive Fred Goodwin’s 703,000-pound ($994,000) annual pension fast payday loan no faxing. Goodwin agreed to cut his pension by 38 percent after the Edinburgh- based bank cleared him of wrongdoing in its collapse and takeover by the government, the bank said yesterday.

Germany already requires financial institutions tapping its 500 billion-euro ($695 billion) bank-rescue fund to cap manager pay at 500,000 euros a year, relinquish bonuses, abandon business the state says is risky and pay dividends only into the state-run fund.

Merkel’s Christian Democrats and the Social Democrats led by Foreign Minister Frank-Walter Steinmeier, facing elections 100 days today, have wrangled over the latest steps applying to all public companies. The parties agreed only this week on a compromise that excludes bonuses from sanctions while raising fines on fixed salaries for negligent executives.

‘Pure Populism’

Even so, Manfred Wennemer, the former chief executive officer of tiremaker Continental AG, dismissed the steps as “pure populism.” Companies have already reined in top managers’ pay during the crisis, showing that market mechanisms function adequately, he said in an interview on NDR television.

Chief executives at DAX companies earned on average 3.68 million euros in 2008, 24 percent less than in 2007, according to business consultant Towers Perrin in Frankfurt. At the same time, earnings per share for the 30 companies in the benchmark index fell an average 58 percent.

Martin Winterkorn, the chief executive of Volkswagen AG, was paid the most among DAX managers last year, earning 12.7 million euros, according to company figures. Josef Ackermann, the chief executive of Deutsche Bank AG, volunteered a 90 percent pay cut last year to 1.38 million euros.

Coalition and opposition lawmakers have bridled at attempts by several former company chiefs to win better deals over pay settlements in court.

In March, Georg Funke, the former chief executive officer of Hypo Real Estate Holding AG, began a legal battle to increase his pay settlement after being fired. The government has granted 102 billion euros of credit lines and debt guarantees to keep Hypo from bankruptcy.

“I’m not totally opposed to putting a brake on runaway pay,” Boerner said, adding that he can understand the pressure for action during the crisis. “I do oppose politicians dictating pay rules.”

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The nation’s builders boosted their production in May, starting new housing units at an annualized rate of 532,000, up 17.2% from the revised estimate of 454,000 in April.

The data release, a monthly report from the Census Bureau, also revealed that building permits jumped by 4% to a rate of 518,000 from 498,000 in April.

Both figures were higher than expected. A consensus estimate from Briefing.com had forecast that starts would rise 485,000 and permits to 508,000.

But despite those big improvements against record lows set the month before, the home construction industry still sits deep in the doldrums. In May 2008, new home starts showed an annual rate of 975,000. Two years ago, the rate was about 1.4 million units.

Builders’ confidence may get a boost from existing home sales, which have inched up from record lows set during the winter.

In the latest survey of builder confidence, released Monday, it actually declined a point to 15. Scores above 50 indicate more builders are optimistic about their industry that not and scores of 70 and more were common during the boom years.

"The outlook for home sales has improved somewhat in recent months, due largely to implementation of the first-time home buyer tax credit and gains in housing affordability," said the chairman of the National Association of Homebuilders, Joe Robson.

"However, looking forward, home builders are facing a few headwinds, including expiration of the tax credit at the end of November; a recent upturn in interest rates; and especially the continuing lack of credit for housing production loans credit report."

Condo developers have been especially hard-hit by financing problems, according to Mike Larson, a real estate analyst for Weiss Research. That has led to volatility in the statistics for multi-family housing starts and permits.

Much of the rise in starts during May can be attributed to the 61.7% spike in multi-family housing starts. That compared with a nearly 50% drop in multi-family starts during April. Also noteworthy about the May report was the rise in single-family starts, which posted the biggest jump since January 2006 at 401,000 from 373,000.

"That’s evidence that the market is no longer falling off a cliff," he said. "But we’re still not seeing any rip-roaring rebound. Tighter lending standards, rising mortgage rates, and a dismal employment market will all combine to drag out the turnaround timeline, and ensure the recovery remains a muted one."

Every region gained housing starts in May. The Northeast was up 2%, the Midwest 11.1%, the South 16.8% and in the West a whopping 28.6%. Permits grew 5.7% in the Northeast, 8.9% in the Midwest, 2.3% in the South and 3.8% in the West. 

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