Remember January, when housing starts boomed by 16 percent, in striking contrast to the slump in sales of new homes and existing homes that began near the end of 2005? It's possible that some of the home builders who rushed to take advantage of January's unseasonably warm weather are now regretting their ways. The numbers on housing starts in March out today confirmed, once again, that the housing bubble is popping. With unsold inventory at an all-time high, mortgage rates continuing to climb, and flippers fleeing the market in horror, builders are finally beginning to restrain themselves. Housing starts fell 7.8 percent in March, following an identical 7.8 percent decline in February. (Thanks to the absolutely indispensible Housing Bubble Blog for all housing-related links.)

For the economy as a whole, the retreat of the home builders may be the most challenging news yet. According to Bloomberg News columnist Caroline Baum, fully one-quarter of the jobs created in the U.S. since 2001 have been in "construction, real estate or mortgage finance." (Bloomberg also reported that Mortgage Banking Association is predicting the loss of 80,000 jobs in the mortgage industry this year.)

Historically speaking, the total numbers are still healthy, and if you head over to the National Association of Realtors home page, you can still see the reassuring "news" "Housing Market to Stay at High Plateau." We can always hope that the Federal Reserve knows exactly what is doing, and is ratcheting an overheated market carefully down with its metronomic interest rate hikes. Of course, the last time the Fed cooled a boom with rate hikes, it helped precipitate a mild recession. The question here, as usual, is whether a similar economic slowdown will occur this year, in time for the November mid-term elections, or next.