Mortgage Activity Rises, Rates Dip

Early Wednesday the Commerce Department reported that applications for building permits spiked 16.7% in December, pointing to potential strengthening in demand for future homebuilding activity, though homebuilders began construction on 4.3% fewer homes in the month.

"As we emerge from the traditionally slow holiday season, builders continue to look for signs of improvement in the economy, home buyer demand and builder and consumer credit conditions," said Bob Nielsen, a home builder from Reno, Nev. and 2011 chairman of the National Association of Home Builders.

Though a restrained level of optimism is fair, the short-term housing picture remains fairly grim.

"At this point, housing remains on the sidelines of a weak economic recovery as consumers and builders wait for clear and consistent indications that jobs and economic output are reviving," said NAHB Chief Economist David Crowe. "Meanwhile, the problems that builders continue to confront in obtaining production financing, and in maintaining performing lines of credit, threaten to significantly slow the onset of a housing recovery."

>> Housing Market to Recover in 2013: Analyst

A shadow inventory of homes could take two to three years to clear to a point where housing supply and demand begin to match up, Kevin Brungardt, CEO of RoundPoint Financial, a mortgage origination and servicing firm, told the TheStreet last month. No acknowledged housing bottom will appear until that shadow inventory is significantly curtailed, he said.

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