Markets do have the ability to "look across the valley" and anticipate upcoming changes in the economy. Here are three charts which illustrate how that has happened with onset of the housing market bust and its subsequent recovery.
The first of the above three charts shows the price of lumber futures. Note that prices peaked in 2004, almost two years before the housing market peaked. The second shows an index of home builders' stocks, which peaked in 2005, about a year before the housing market peaked. The third chart shows housing starts, which peaked in early 2006.
As for the housing market recovery, note that lumber futures bottomed in early 2009, home builders' stocks bottomed around the same time, and both lumber futures and home builders' stocks were rising well in advance of the eventual recovery in housing starts, which occurred in mid-2011.
Finally, note that all three indicators are at new post-recession highs. The housing recovery is definitely underway.
This last chart is the Radar Logic measure of housing prices (nonseasonally adjusted). According to this index, prices were up 7.6% in the year ending October 15th. Anecdotally, I continue to see many signs that housing prices have bottomed and are now recovering in many areas of the country. Mark Perry has a nice list here.
UPDATE: Two more charts updated with data released today (12/18/12), both showing continued improvement in the housing market.
UPDATE 2: Below is an updated chart of housing starts, which have soared by 60% since early 2011.