What are these people thinking?

Spring Has Sprung:

"Well… Did you see the housing starts data for the United States yesterday? Amazing! Astounding! And Incredible! Housing starts rose 9.0% in February to an annualized pace of 1.525 million units, slightly stronger than the "experts" calling for an increase to 1.50 million starts. What gives here? Do these builders not see the writing on the wall? Why on earth would they continue to start building more houses with all the houses sitting empty, unsold right now? "Volume" is not going to be the answer to this marketing equation!

"Per Census Bureau, in the fourth quarter of 2006, there were 126.6 million homes in the United States. Of these, 16.7 million were vacant. That is a whopping 13.2% of all U.S. homes that were sitting empty. And this was before the subprime meltdown really sunk its teeth into the housing sector!"

The above is from an interesting free investment letter called The Daily Reckoning.

With just over one house in 8 vacant, is there a need for the housing stock to grow by 9% per annum this year? I just don't get it.

Meanwhile, subprime lenders are already beginning to feel the pain of rising defaults. This thing has to blow sometime and the later it happens, the uglier it will be.