Lack of land, labor and credit are all standing in the way of increasing home buyer demand, and leaving many of the small and mid-sized builders frustrated as their costs soar. They simply don't have the access to cash that the bigger players do.
"I think for the short term the people who have the cash will have the advantage. Over the longer haul, I think it will even out. I think the recovery is uneven," says Howard.
(Read More: Is Multi-Family HomeConstruction Overheating?)
The first builder to report Monday is Virginia-based NVR, with Ryland, Pulte and D.R. Horton continuing through the week. Analysts say Texas-based D.R. Horton, whose stock has recently outperformed its peers, is the one to watch, a bell weather for the group.
"They are the largest builder in terms of the number of closings, and they are in the most markets, so they will probably be able to tell us not only about orders, but also about other things that are important to folks now, like what are material prices doing, how are you negotiating with suppliers," notes Megan McGrath, an analyst at MKM Partners.
Most of the big builders have seen dramatic growth in new orders, as first time home buyers slowly come back to the market. These buyers are facing stiff competition from all-cash investors in the existing home market, and are therefore looking to new builds. D.R. Horton is an entry-level builder, but has been able to shift product to move-up buyers when the demand is there. Move-up buyers have been moving out of the market of late, despite the overall housing recovery and rising values.
"I think the recovery we're seeing right now is first-time buyer and the very high end of the market. The move-up buyer has not really shown up as of yet, and if you want to see a very strong recovery in housing we need to see the move-up buyer playing a more prominent role than they are today," says Richard Smith, Chairman and CEO of Realogy Holdings Corp.
Monthly readings on new and existing home sales are also out next week and will offer more insights into the current strengths and weaknesses of the housing recovery in this crucial Spring season.
(Read More: What's Holding Up City Home Prices? Boomers)
"In a worst-case scenario, confidence could weaken further and housing starts could mark time," says Paul Diggle of Capital Economics. "But by far and away the most likely outcome is that the construction industry's growing pains are overcome and homebuilders break ground on many more sites over the next few years."
Tim Boyle | Bloomberg | Getty ImagesIt’s one thing to jump on the bandwagon when things are getting better, it’s quite another to jump off of it when everyone around you, not to mention your own company’s earnings, would seem to confirm that sentiment. But that’s just what Donald J. Tomnitz, CEO of D.R. Horton [DHI Loading... () 
] , the nation’s largest homebuilder by volume did. “I still don’t see a lot of jobs being created,” he told an earnings conference call, sending his company’s stock down when it should have been riding higher on a 24 percent year-over-year jump in new orders for homes. He is concerned about the future of this fledgling housing recovery, and he has reason to be. Mortgage delinquencies and foreclosures are driven by unemployment. The homebuilders are rising from the ashes, after overbuilding and a credit crash sent sales and construction to levels not seen economists began counting all those numbers; they are rising, but not necessarily thriving. While overall buyer demand has been weak, distressed properties (foreclosures and short sales) have stood as the greatest competition, as many of those homes are in fact relatively new construction. The good news is that mortgage delinquencies are falling, down to 5.41% of all mortgages outstanding in Q3 of 2012 from 5.88% a year ago, according to a new report from TransUnion. “Continued declines in mortgage delinquency rates are a welcome sign and reflect that relatively more homeowners are able and willing to make their mortgage payments each month,” said Tim Martin, group vice president of U.S. Housing in TransUnion’s financial services business unit. “However, we still have a long way to go to reach more ‘normal’ conditions of a delinquency rate in the 1-2 percent range for the U.S. average.” (Read More: 
Housing starts fell unexpectedly, but building permits, an indicator of future construction, rose to levels not seen since 2008. The usual volatility in monthly government surveys is exacerbated in this particular one by the fact that it reads both single and multi-family (apartment) construction.Multi-family has been surging of late due to huge rental demand … and that’s where things today are getting even trickier. A small but growing number of developers are now building single family homes as rentals. Historically, builders did this largely in low-
“While this second solid monthly gain on the builder confidence scale is encouraging, the overall measure remains quite low due to the many challenges that home building continues to face with regard to the high number of foreclosures, the difficulties of obtaining construction financing and accurate appraisals, and the restrictive lending environment that is discouraging potential buyers,” said Bob Nielsen, NAHB Chairman and a home builder from Reno, Nev. Confidence rose in three of the four geographic regions, with the Midwest seeing the biggest gains. Out West, where distressed properties are making up more than half of the housing market, confidence dropped significantly. Builders saw the biggest gains in current sales conditions, with future expectations and buyer traffic still up, but slightly less. Builders credit extremely favorable mortgage rates and home prices for tempting more buyers into the market, but they also lobbied heavily for Congress to reinstate higher loan limits at mortgage giants Fannie Mae and Freddie Mac. Loan limits there fell from $729,750 to $625, 500 on October first. This week lawmakers instead made a deal to raise limits at the FHA, but not at Fannie Mae and Freddie Mac. The builders' association is still supporting the measure. "To help mend the struggling housing market, stabilize home values, provide constancy while private investors re-enter the market and ensure that millions of creditworthy home borrowers can access the best possible mortgage rates, Congress must support this bill to help American families and get the lackluster economy moving forward," Nielsen wrote in a statement. Several builder analysts have upgraded various public builders recently, expecting a turnaround in the sector sometime next year. Housing starts rose significantly in September, but that was largely on the back of the multi-family sector, responding to increased rental demand. Expectations for October starts are flat to lower. They will be released Thursday morning by the Commerce Department. Questions? Comments? document.write("
From D.R. Horton's [DHI Loading... () 
] Donald Horton: "Market conditions in the homebuilding industry are still challenging, with high foreclosures, significant existing home inventory, high unemployment, tight mortgage lending standards and weak consumer confidence. However, housing affordability remains near record highs, interest rates are favorable and new home inventory is still very low," Horton said. "We continue to focus on providing affordable homes for the first-time buyer while having product available for move-up buyers, further adjusting our cost structure relative to our current sales pace." Translation: We're still in the dumps, but we're lowering prices, so come on and buy. Pulte's [PHM Loading... () 
Rubberball/Tyler Marshall | Getty ImagesThe only thing more cold and gloomy than my pre-dawn live shot here in Seattle this morning was the 
The National Association of Home Builders reported