Agreed, but there's zero arguement that building homes is much more economically stimulative than just "working off the existing inventory." There's a lower dollar multiplier associated with working off inventory (relative to building), and thus lower velocity. Although it's necessary at this point, it's just not the same effect.
The media is spinning everything as positive these days. There was a Barron's article over the weekend speculating that housing starts would be up 2% and how that was a sign of the bottom in housing. Today the media is spinning the record drop in starts as positive for the reason you stated.
The media waits for the market's reaction before deciding what spin to put on the news. I saw the headlines change at least 3 times today.
Housing starts, permits should have decreased by more than 80% from their all time high, there is already (15%) more homes than households in the US
I wouldn't disagree with a word you said, but I can offer some light based on real data. Now what the data means is certainly up for debate. The basic background: I live in Florida which of course is a high foreclosure state. I get a report from a realtor friend every month that covers all listings/sales and pending sales in my area. I believe "my area" is defined by MLS and is not the whole state or even the whole city that I live in. The lastest report for April just came today. SInce Jan 2008 the supply of homes for sales in my area has ranged between 13 and 16 months. Something big happened in April though. The number of homes listed fell by 50% and is now much lower than any other month since 1/2008. The number of sales for Apr was greater than all of Dec, Jan, Feb and Mar combined. The number of lending sales exploded as well. The average price per sq/ft stayed the same for the 2nd month in a row. Mar was the first month since 1/2008 this didn't fall. The supply dropped to 6 months. The average selling price was 94% of list. Highest since 6/2008. The average price, fwiw, was 254K. By no means am I arguing that real estate is fixed. I thought these numbers were interesting though and was suprised at how quickly the supply fell in just 1 month. But, this is just one area.
It's 'anti-American' to post this kind of fact-based information. None other than our own market guru - surf - said so. Get on the Kudlow chain-gang, commie.