Mortgage backed securities (MBS) prices are slightly higher in quiet trading as investors await Treasury's announcement on Thursday of the size of 2, 5 & 7yr auctions which resume on May 26 and results of the Fed's purchase of government securities tomorrow and May 21; FNMA 4.0% coupon 99.92bps, +1bps. Housing Starts unexpectedly fell sharply, down 13% to a record low annual rate of 458K, indicating further declines in property values are needed to spur any rebound in homebuilding, which has subtracted from economic growth for more than 3 years. A plunge in work on condominiums and apartments buildings overwhelmed the second straight gain in starts on single family properties. Multifamily starts declined 46%, while construction of single family homes rose 2.8%. Confidence among U.S. homebuilders in May increased to the highest level since September, from 14 to 16 based on NAHB Housing Index. However, any reading below 50 means most respondents view conditions as poor. Homebuilders clearly understand that any new construction will likely sit on the market for some time, having to compete with fire sale prices on foreclosures. Store sales were weak as cold weather hurt seasonal demand. According to ICSC-Goldman & Redbook, sales are down 0.3% year over year and fell 1.2% month to month. A third month decline in retail sales would seriously push back the economic outlook and dash optimism that the deepest part of the recession is over.