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More signs of a housing bottom

Data released today provide more support for the theory that we have seen the bottom in housing. The first chart is an index of the stocks of 18 leading home builders. It has reached a 19-month high, and is up 140% from its March '09 low. The second chart is the result of a survey of home builders that covers questions on present sales, sales expectations, and prospective buyer traffic. It is still quite low, but has more than doubled from its January '09 low. The third chart shows a continuing decline in the supply of unsold homes on the market. The pace of the decline looks very much like what occurred in early- to mid-1980s housing market recovery. The fourth chart shows a clear bottoming in the number of existing homes sold (the spike late last year was related to the anticipated end of the home buyers' credit).

Add to these signs of resurgent activity the fact that mortgage rates are at or very near all-time lows; that housing prices in 20 major markets have dropped by one-third in real terms since reaching a peak four years ago; and that signs of a general economic recovery are widespread. The resulting picture becomes quite clear: the great housing market bust is over, and a new growth cycle is underway.

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