Despite these solid results, a cloud still hangs over the home building recovery in the form of further interest rate hikes. The Housing Industry Association (HIA) said that the increase in housing figures must be treated with caution as heightened anxiety over interest rates during the month saw a 4.5% increase in households refinancing existing loans. The figures also indicate that the number of first homebuyer commitments as a percentage of total owner-occupied housing finance commitments decreased by 1.4% between April and May this year. First homebuyer commitments have traditionally been a leading indicator of where the market is heading. HIA's executive director of housing and economics, Simon Tennent, said that today's numbers will come under the scrutiny of the Reserve Bank, but stressed that it's still too early to assess the full impact of the May rate rise. These sentiments were echoed by the HIA's Market Snapshot Report, which indicated rising interest rates, land shortages, and a lack of urgency among homebuyers is keeping the brakes on new home building. "A clear negative impact of the interest rate rise on the Sydney housing market highlights the risk to other markets should another hike come to pass," said the HIA's chief economist, Harley Dale. "A steady as she goes outlook coupled with some modest recovery best sums up the state of play for Victoria, South Australia and Queensland. NSW is weaker while conditions in Western Australia are set to remain very strong," Dale noted.

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