Housing activity slackened considerably in March, hitting a pace of just 947,000 starts and 927,000 permits, according to U.S. Census data released this morning.

"We were expecting starts to fall, but not below one million," says Celia Chen, director of housing economics for Moody's Economy.com. "This is a very weak report. This puts starts back to the level of the 1988-1991 housing slump, so it basically puts us back a decade."

(In March 1991, overall housing starts stood at 921,000, according to historical Census data.)

Compared to February 2008, housing starts in March fell 11.9 percent while permits, an indicator of future building activity, slid 5.8 percent. Year-over-year, though, activity has plummeted. Total starts plunged 36.5 percent compared to March 2007. Total permits dived even deeper, with a 40.9 percent reduction year-over-year.

In terms of single-family construction, builders reported 680,000 starts in March, a 5.7 percent dip from February. That represents a 43.6 percent drop from March 2007. (That pace is even lower than March 1991, with its pace of 750,000 single-family starts.)

Single-family permits followed a similar path, with an annualized pace of 606,000, which is a 6.2 percent monthly decline. Year-over-year, single-family permits are down 46.4 percent.

Such statistics contain both encouraging and discouraging news for builders. "Construction activity has fallen about as low as necessary to clear the market," Chen says, "but it will need to stay low for several quarters before price appreciation begins to firm."