Want to see what a bottom looks like in a chart? Look no further than the market for new home building. The National Association of Home Builders and Wells Fargo calculates a Housing Market Index, which provides a measure of how conductive the economy is to new home construction. As you can probably guess, it's not a great time to be a home builder. In fact, it's been an awful market since the boom peaked in 2005:
Rarely can you see the bottom of a trough so clear in a chart, but there it is. In mid-2005, the index was above 70. Since September 2007, it has only risen above 20 once -- and that was only because the home buyer credit was expiring so some Americans were scrambling to beat the deadline.
Since winter, the index has become extremely stable. We learned today that it was at 16 again, for the sixth time in seven months. The bad news for home builders is that it probably won't rise much in the near- to medium-term either. As long as distressed property sales remain high, buying and renovating an existing home is a bargain compared to breaking ground on new construction. So at the bottom of the trough this market will likely stay, until most of the massive inventory of foreclosures is worked through.