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Another sign of a housing bottom






This Bloomberg index of the stocks of major home builders is up 133% from its Mar. '09 low. That's pretty impressive, especially since housing starts are up only 10% over the same period, and the NAHB index of builders looks pretty flat. I think this is a clear instance of the market "looking across the valley" of current despair. Residential construction has fallen to all-time lows relative to the market, and is way below the levels needed to keep up with a growing population. The industry has contracted for four straight years, and this can't go on forever. We've most likely seen the bottom in housing. Of course, the recovery may take awhile and it may be tepid, but the bad news is a thing of the past. Now, it's only a question of how fast and how strong the recovery is.

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