'Dark before the dawn'

That's the title of Citigroup analyst Stephen Kim's report on the homebuilding industry that came out this morning - and was cited, in part, for today's 191-point Dow gain. "In this sector, with its long history of feverish booms and catastrophic busts, it is precisely when things have gotten this bad that the stocks start looking good," Kim wrote. The locally-based homebuilders seemed to perk up on the news; KB shares were up 3.6 percent and Ryland was up 6.6 percent. Kim, who has tended to be bullish, stresses that the housing market won't turn things around any time soon, but that there are signs of a bottoming out. Don't tell that to the OC Register's Jon Lansner, whose Big Orange Index, a quarterly compilation of three dozen or so economic barometers, advanced this summer at the slowest annualized rate of growth since mid-2002. And Lansner expects the numbers to be even worse once all the revisions play out. Here’s more:

The blame falls squarely on the housing market. The Big O's real estate index has fallen for six straight quarters – the longest losing streak since the ugly days of 1994-95. Looking back even further, the index has been down in eight of the last 13 quarters. The key culprits are weak home pricing and shrinking levels of mortgage making. Compounding the real estate headache are troubles with the Big O's banker index. This measure of local bill payments has dropped in six of the last nine quarters amid rising levels of skipped house payments, bankruptcies and unemployment. Local bill collections, by this measure, haven't been this bad since 1999.