Home builders reported encouraging signs of stabilisation in the housing market, but cautioned that foreclosures and rising interest rates cloud the outlook.

Toll Brothers Inc. and Hovnanian Enterprises, said losses in the fiscal second quarter shrank from year-earlier levels as lower prices lured some buyers back into the market.

A report Wednesday from IHS Global Insight said home prices on average fell at an annual rate of 2.2% in this year's first quarter, compared with a 12.5% rate in the fourth quarter of 2008. The report is based on price data from the Federal Housing Finance Agency. In the latest quarter, prices were down in 199 of 330 metropolitan areas examined in the study. In the fourth quarter, 312 metro areas showed declines.

'While it's too early to see a bottom of this housing downturn,' the report said, the latest data 'may signal that the market is beginning to stabilize.'

Wall Street Journal