This may be another head-fake like April '10, when housing starts jumped to 687K, but I think the evidence supporting the notion that housing has bottomed is getting pretty strong. Today's release of September starts was the second-highest since this recovery began, and it exceed expectations by over 10%. For the past five years, housing construction has suffered its worst slump in history, and its about time things started to get a little better. (I'm told that the head of a large local construction recently said "I've been working for charity for the past five years.") At the very least it's safe to say that we've seen the worst, and things can only get better from here.
A powerful recovery in housing starts is not likely imminent, but it is inevitable. Our population is growing and our economy is growing, but the current level of starts is substantially below the level of household formations—if construction doesn't pick up we will soon face housing shortages.
I note further that the Bloomberg index of homebuilders' stocks (see chart above) is up 25% so far this month, after hitting a two-year low (it was as high as 440 in mid-2005). Things are definitely stirring, and the long-term upside is potentially huge.