Increased Inventory Means More Trouble

More economic news in the housing market. "The February [housing] starts, while a big jump from January, were still 28 percent below February 2006 numbers, and were the fifth weakest reading since the beginning of 1998. Building permits, which generally are not as affected by weather as are housing starts, fell to an annual rate of 1.53 million from the 1.57 million pace in January. The drop was bit worse than economists' forecasts for permits, which are seen as a measure of builder's confidence in the market. They had looked for the permits to slip to only a 1.55 million rate. David Seiders, the chief economist for the National Association of Home Builders, said he doesn't believe that the downturn in home building has yet found a bottom."

Link to full article below.

So here's how I see it. Housing starts are up a little bit (but still off from year-ago numbers). do we really need more housing inventory. Defaults continue to rise. Foreclosures are increasing, even with Alt-A borrowers. That means we'll have more existing inventory on the market, as well as already-high levels of new construction. Add to that the fact that lenders are tightening standards and making 100% LTV and subprime loans more difficult to come by...which means fewer potential buyers. Doesn't look good. Am I adding things up wrong? Is the foregiving stock market an indication that things aren't as bad as it looks? Will the coming of Spring bring a needed renewal to the housing/lending markets?

http://money.cnn.com/2007/03/20/news/economy/housingstarts/?postversion=2007032011