The stock market took a dive today partly on the news that US housing starts were down 22.5% since January - their second lowest levels since 1946. New home construction permits also fell 8.2% from January - 20.5% below February 2010 numbers.

Now numbers can tell you almost anything, depending on how you slice them - which is one of the many problems with our industry. Same-month and month over month data doesn't take into account increased bureaucratic timelines for new permits, for example, or bad weather, or any other factor that might make February 2011 different from February 2010. So it's smart to look at more than one month for your comparison, and when you do - the picture is just as bad: Great January starts were completely wiped out by horrible February starts, suggesting that the construction industry is stuck in a funk.

Of course, there's no surprise here, and there should have been no surprise on the part of the markets either. What did they expect? There's no way new construction can compete with foreclosures and short sales in this market. The median sold price of sales in February fell 15.3% to $110,000 in Tampa Bay. The median sold price per square foot of these sales was $67. If you look at only distressed sales (foreclosures and short sales), the median sold price in February was $54/sq.ft. Look at just Foreclosures and that number falls to $48/sq.ft.

A person of average intelligence can see what's going on here. A builder can't sell a new home at $100/sq.ft (or more) when his competition - Banks and Lenders in this case - are selling their roughly-comparable homes for $48/sq.ft. Why on earth would you pay double just to get something new? I may have to replace the carpet and repaint the walls in a foreclosure home, but I can buy a lot of carpet and paint for $52/sq.ft.

The market reacted to this news like it was the end of the world when in fact this was nothing more than a common-sense conclusion. Builders, you're not going to win as long as your biggest competitor is a bank who goal is to rid himself of a toxic asset, not to make a profit. We're playing by a different set of rules, and in this economy, the Bank holds all the cards.