US housing starts drop unexpectedly in March 2012 to 5 month low, excess supply of cheaper existing homes, new homes can't compete

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4/17/12, "U.S. Housing Starts Unexpectedly Drop to Five-Month Low," Bloomberg

"Builders began work on fewer homes than forecast in March, signaling a sustained industry recovery will take time to get underway.

Housing starts dropped 5.8 percent to a 654,000 annual rate, less than the lowest estimate of economists surveyed by Bloomberg News and the least since October, Commerce Department figures showed today in Washington. The slump was led by the volatile multifamily category, which at the same time showed a jump in permits, a proxy for future construction.

While warmer weather may have spurred home construction at the beginning of 2012, a competing supply of cheap existing properties may be steering potential buyers away from purchasing a new home. That means home construction may not help boost the economy in 2012....

(Last paragraph): Existing homes are also offering a cheaper alternative to new properties. The difference between the median price of an existing and new single-family house was more than $76,000 in February, near the widest gap on record and more than $50,000 larger than when the recession began in December 2007."

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