Plunge in housing starts: good news or bad?

Lately, it seems that trying to figure out the health of the housing market from the most recent stats on starts, sales and prices is a lot like reading tea leaves. The latest bit of news is that housing starts fell sharply in March, although starts for single-family homes has remained constant. According to the L.A. Times, that could mean good news:

Groundbreakings on single-family homes held steady for the third month in a row in March, even as the number of condominium units and apartments under construction fell sharply, according to federal data released Thursday.

Economist Edward Leamer, director of UCLA's Anderson Forecast, said the stability in single-family home construction is a positive sign.

"The downward trend we've been seeing for a long time isn't evident anymore," Leamer said. "We won't know if we've really hit the bottom for a couple of months, but this is certainly consistent with being near the bottom."

But not all the news was good. Construction began on 152,000 apartment buildings nationwide in March, down nearly a third from the previous month and 51% from a year earlier. In the West, builders began work on just 10,000 multi-family buildings in March, a fourth of those that were started in February and down even more from the previous year.

That, along with the fact that there's still less construction going on now than there was last year, brought the overall numbers for new housing down 48% nationwide over the same month in 2008.

Over at the New York Times, they're painting a slightly different picture:

“There’s still no clear indication that the construction market is coming back,” said Mike Larson, a housing analyst at Weiss Research. “Even if companies want to start projects, they’re having a harder time getting the money to do so. We’re being overwhelmed by distressed inventory as well as regular sellers trying to get out of their homes. There’s not a heck of a lot of incentive for builders to ramp up construction.”

Still, some housing experts say the decline in home building was a crucial step toward lowering the glut of unsold houses and condominiums on the market so that housing supply once again lines up with demand...

And what about foreclosures?

Also on Thursday, the data firm RealtyTrac reported that foreclosure filings surged 9 percent, to 803,489 properties, in the first quarter of 2009. RealtyTrac said that foreclosure notices increased 17 percent in March from February.

“We saw a record level of foreclosure activity,” James J. Saccacio, chief executive of RealtyTrac, said in a statement. He added that foreclosures would probably increase in the next months as temporary halts to foreclosures expired at banks and agencies like Freddie Mac and Fannie Mae.

The flood of cheap foreclosed homes and distressed properties has helped push home prices lower across the country, especially in areas hit hardest by the housing downturn, like Southern California, Arizona and Florida...