An economist at Wells Fargo Securities expects homebuilding to improve modestly in 2012, with most of the gains coming from apartment construction.

Housing starts jumped 9.3 percent in November, as unseasonably warm weather boosted activity in a normally slow month. Multi-family starts jumped 25.3 percent, while single-family starts rose 2.3 percent.

Single-family permits rose 1.6 percent in November to a 435,000-unit pace. Through the first 11 months of 2011, single-family permits have totaled 384,400 units, down 22.4 percent. Single-family permits are running below starts, which is not an encouraging sign.

The latest reading from the National Association of Homebuilders/Wells Fargo Housing Market Index shows some modest improvement in December, with expected buyer traffic and expected sales rising to their highest levels of the year. This is consistent with our forecast for modest gains in 2012, said Mark Vitner, an economist at Wells Fargo Securities.

It is believed that home prices will come under additional pressure this winter, as more foreclosures come on the market during the seasonally slow sales period. Vitner further said appraisals were likely to remain conservative for at least the next year, or until the mountain of foreclosures hanging over the market finally clears.

The analyst also stressed he was looking for only a modest rise in new home sales and single-family construction in 2012 but he looks for prices to find a bottom by the middle of next year.

Vitner concluded by saying the return to a normal housing market, where supply and demand are in balance and prices are rising 2 percent to 3 percent a year, is still, unfortunately, years away.