Construction spending fell unexpectedly 0.7 percent in May from a record level. as both residential and nonresidential building slowed, the government reported today. Spending to build homes, offices, schools and other residential and nonresidential buildings slipped to an annual rate of $852 billion in the month before last, the Commerce Department said.

April's pace was revised downward to $858.2 billion, still an all-time high.

Despite the drop in residential spending in May, low interest rates for mortgages have propelled home buying and building to high levels.

The 30-year fixed rate mortgage has fallen to near 6.5 percent in recent weeks, making home buying affordable for many first-time buyers and a bargain for repeat home buyers.