Housing Market to Recover in 2013: Analyst

WASHINGTON ( TheStreet) -- Thursday's disappointing homebuilding permits data further confirms that the "housing market recovery remains fragile at best," said Kevin Brungardt, CEO of RoundPoint Financial, a mortgage origination and servicing firm.

He cited the usual suspects of high unemployment, potential buyers' low confidence among in the stability of home prices and the large inventory of distressed properties that still need to be cleared.

>>Housing Starts Rise 3.9% in November

Homebuilders began construction on 3.9% more homes in November, better than the expected growth rate, while applications for building permits fell 4%, pointing to a softening in future homebuilding activity.

Foreclosure activity declined dramatically in November, but Brungardt said the 21% month-over-month drop was "a false positive," a result of the so-called "robosigning" scandal that led to procedural delays and foreclosure moratoriums at servicers like Bank of America ( BAC) and JPMorgan Chase ( JPM). Even Fannie Mae ( FNMA.OB) and Freddie Mac ( FMCC.OB), which stand behind the vast majority of U.S. mortgages, have said they won't push forward on foreclosures during the holiday season.

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

>>Homebuilder Stocks: Behind the Numbers

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

>>Homebuilder Sentiment Disappoints

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.

Stocks in the homebuilder sector were mostly higher Thursday following the report on housing starts and building permits. The SPDR S&P Homebuilders ( XHB), an exchange-traded fund that tracks the sector, was 1.2% higher in early-afternoon trading, while the iShares Dow Jones US Home Construction ( ITB) ETF rose 1.4%.

The U.S. housing market continues to struggle and has been under tremendous pressure for some time. Demand fell further after the expiration of federal tax credits for homebuyers earlier this year.

-- Written by Miriam Marcus Reimer in New York.

>To contact the writer of this article, click here: Miriam Reimer.

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