March housing starts dropped nearly 12 percent from February and more than 36 percent from a year earlier, the Census Bureau reported today. At the same time, "permits dropped 5.8 percent to 927,000, also far below the consensus, 970,000, and the lowest level since April 1991," Ian Shepherdson, the chief U.S. economist at High Frequency Economics, said in a report. He called it "further evidence, as if it were needed, of the catastrophe in the housing market."
Still, despite the dismal report, a decline in home-building activity should help reduce the bloated inventory that is punishing the market.
"The drop in starts combined with falling prices will help pare the overhang of unsold homes that will eventually set the stage for a rebound in homebuilding later this year or early in 2009," David Resler, chief economist at Nomura Securities, said in a report.