At the risk of committing heresy, I think the US housing market may have hit bottom. Needless to say, any revival would be taken badly by the Treasury market, which is counting on further Fed rate cuts to stave off a housing-led slump.

Home sales plunged over the summer as mortgage credit conditions tightened and the sub-prime crisis hit confidence. However, the home-buying conditions index of the University of Michigan consumer survey recovered sharply in early October, reaching its highest level since May. As the chart shows, this index tends to lead home sales.

Rather than extrapolate falling prices, consumers appear to be viewing recent weakness as a reason to buy. The share reporting favourable conditions because of low prices rose to a record high in early October. Stable labour market conditions and falls in mortgage rates for prime borrowers may also have contributed to the improvement in sentiment.

Any recovery in demand could quickly boost homebuilding activity. Single-family housing starts have fallen by much more than new sales since the market peaked in late 2005. New construction has been below the pace of sales since July last year and the number of unsold homes declined to a 19-month low in August.

I could be early. This week's release of the NAHB homebuilders survey for October and housing starts and permits for September will provide further information. Homebuilders' stock prices are still languishing near their lows, so have yet to signal an improving outlook.