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Housing Starts Rise 3.9% in November

Brungardt estimated that the shadow inventory of homes could take two to three years to clear to a point when housing supply and demand begin to match up again, and that no acknowledged housing bottom will appear until that shadow inventory is significantly curtailed.

Homebuilders should expect material dampening of new-home purchases until then, Brungardt forecast. Current homeowners will also continue to be impacted unfavorably, he said.

Brungardt added that the recent spike in mortgage rates -- a jump of 70 basis points over a short period of time -- also worked to delay a housing market recovery. Rates are still historically low, he conceded, but need to stay in the 4.5% to 4.75% range in order to fuel a meaningful recovery.

>>Mortgage Activity Eases as Rates Edge Up

He expects mortgage rates will fall again and then level out for a period of time.

The average rate on a 30-year fixed mortgage increased to 4.84% in the week ending Dec. 10, from 4.66% in the prior week, the Mortgage Bankers Association said early Wednesday. It was the highest rate observed since early May and was the fifth consecutive weekly increase.

On Wednesday the National Association of Home Builders said its index of homebuilder sentiment came in flat in December, month-over-month, as interest among potential buyers remained sluggish.

The NAHB index, which measures builder perceptions of current single-family home sales and sales expectations for the next six months, came in flat at a reading of 16 in December, disappointing industry watchers who expected the index to tick up to 17, according to consensus estimates from Briefing.com. Any reading below 50 indicates poor sentiment. The index has not been above 50 since April 2006.

>> Homebuilder Sentiment Disappoints

"Builders are bracing themselves for a slow holiday season as a number of factors continue to cause uncertainty among consumers and builders alike," said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. "While the [housing market index] adjusted for seasonal factors, the typical cold-weather slowdown in sales activity is being accentuated by ongoing weakness in the job market, the rising number of foreclosures and short-sales, and very challenging credit conditions for both builders and buyers."

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