Housing Starts Best in Over Four Years: 

The rebound in U.S. home building accelerated in December, capping the best year for the industry since 2008 and adding to signs that residential real estate is contributing to economic growth.

According to Commerce Department data, New Home Starts climbed 12.1 percent last month to a 954,000 annual rate, which exceedied all forecasts of economists.  Spurred by record-low mortgage rates, home construction will probably keep making headway in 2013 as it recovers from the worst slump since the Great Depression.

Housing starts remain short of the 2.07 million in 2005 at the peak of the boom, which was three-decade high. They averaged 1.74 million a year from 2000 through 2004. All four regions of the country showed a gain in starts last month, led by a 24.7 percent surge in the Midwest. Construction of single-family houses climbed 8.1 percent in December from the prior month, to the highest level since June 2008. Work on multifamily homes jumped 20.3 percent. 

Free and clear homes point the way to next round of housing demand: 

We are all too familiar with the constant media reports that state that approximately one third of home owners are "upside down" or "underwater" on their mortgage. This is when they owe more on their mortgage than what their home is worth.  As home prices have been steadily increasing, these people are less "underwater" than a year ago but they are still essentially stuck in their current  home.

But a new report by Zillow shows that one third of all homes are owned "Free and Clear" with no mortgage at all. 

Demographics, home prices and geographical location all seem to play into "free-and-clear" home ownership, according to Zillow's survey. Obviously, the longer someone owns a home, the more likely they are to have paid off a mortgage. When looking at free-and-clear ownership rates as a percentage of homeowners in various age groups, however, Zillow found 34.5 percent of 20- to 24-year-old homeowners are free of mortgages. This represents an upwardly mobile block of homeowners that can sell their homes and purchase a new one.

Experts Bullish on Housing: 

Home prices are now rising at their fastest pace since 2005. Housing bulls are running again, pointing to rising construction starts, rising home sales and falling mortgage delinquencies.

"Low prevailing mortgage rates, the limited supply of existing homes for sale (either due to the few foreclosure completions or the number of underwater borrowers who cannot sell), and the anemic levels of new home construction are facilitating affordability and feeding demand," noted analysts at Fitch Ratings. "These factors are offsetting weak fundamentals that would otherwise hinder home price growth, such as high structural unemployment and lackluster wage growth."

With economic growth starting to pick up in 2013, so will mortgage rates.  Mortgage rates directly correlate with economic growth.  As the economy grows, so will rates.  But is that a bad thing for housing?  Actually, its not.

Historically, when mortgage rates start to trend upward, purchasers finally "get off the fence" and pull the trigger on that next home particulary with home prices rising.  Plus, the uptick in mortgage rates that results from a growing economy will still be relatively low compared to other periods when the housing market flourished.  It will certainly dampen the refinance activity but will spur purchase activity.

Pending Home Sales and New Home Sales Improve: 

The number of contracts signed to buy previously owned homes in November rose to the highest level in more than two years on a seasonally adjusted basis, the latest sign of how housing demand has firmed up.
The National Association of Realtors said their index of pending home sales, reflecting sales that have gone into contract but haven't yet closed, rose 9.8% last month from one year ago and by 1.7% from October, marking the 19th consecutive month where contract activity has risen from the previous year.

More recently, traditional buyers—who plan to live in the home they buy—have returned in growing numbers. Household formation is expanding as the economy posts modest job growth. Rising rents and prices are sparking a sense of urgency among buyers, who are increasingly frustrated by the lack of attractive inventory.

In a separate report, New-home sales rose in November, recording their strongest pace in more than 2 years, another sign of improvement in the housing market.

The Census Bureau reported Thursday that sales of new homes rose to an annual rate of 377,000 in the month, up 4.4% from October, and up 15% from year-earlier levels. It was the highest rate of new-home sales since April 2010, when sales were inflated by a temporary $8,000 tax credit for home buyers.