More Evidence of a Bottom in Housing

According to recently released data, U.S. housing starts have risen 30% from their all-time low in April '09. In addition, building permits increased 38% over the same period. And not surprisingly, the Bloomberg index of home builders' stocks bottomed last July and has since risen over 50%. The prices of home equity-backed securities are rising sharply. If this doesn't add up to a clear picture of a bottoming in the residential construction market, we're not sure what would.

To be sure, this "bottom" has taken almost a year to form, which makes it the longest-drawn-out recession bottom since data began to be recorded in 1968. Also, housing starts in the winter months are full of seasonal adjustment factors which may or may not accurately reflect underlying activity. But an increase of 30% in just under a year is pretty impressive nonetheless, and hard to chalk up to seasonal or weather-related vagaries.

With most signs pointing to an end to the worst housing recession in modern history and a clear beginning to a housing recovery, the widespread angst over the homes remaining to be foreclosed and auctioned off seems overdone. The recovery seems to be for real.

The true test will come now that tax incentives for buying a new home no longer factor in to the market.