Hurricane Sandy, and now the nor’easter storm that’s blown through the Northeast, has obviously caused a lot of devastation from an economic standpoint. That extends to the housing market. The 90-day moratorium on foreclosures will dry up a lot of inventory for speculators. And it’s already cutting into the mortgage application index.

“Last week’s storm had a significant impact on application volumes on the East Coast,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “Applications fell more than 60 percent compared to the prior week in New Jersey, almost 50 percent in New York and nearly 40 percent in Connecticut. Other East Coast states also saw declines over the week, while many states in other parts of the country had increases in application volumes.”

(That doesn’t really account for another 5% drop in refinance applications, the 5th week in a row showing a refi drop.)

Storms in a high-density area like the Northeast Corridor can disrupt the overall housing market. I don’t really know why there would be an expectation of a big bounce-back. The winter is a slow time for housing generally.

One thing that would definitely boost the market, either for single-family homes or renters, is an increase in household formation.

Americans are setting up house at the fastest rate in more than six years, an indication that recession anxiety, which prompted adult children to move in with their parents and single people to postpone marriage, is starting to ease.

The nation added 1.15 million households in the 12 months that ended in September, according to the most recent Census Bureau data. That is a significant rise from the past four years when an average of 650,000 households were formed annually. While what economists call “household formation” is running a little lower than the average 1.25 million added annually during the boom years, the latest data nevertheless represent an important shift.

Rising household formation, which is tied to employment growth, means more students are finding jobs when they leave college, more adult children are leaving their parents’ homes and more couples feel confident enough about the future to tie the knot. It could also mean that immigration is picking up.

This would definitely increase demand, and with supply intentionally constrained, that would accelerate the recovery and lead economic growth. This is possible for 2013, but I think the construction could come on multi-family units rather than unaffordable single-family homes, particularly given the rise of student debt.

But with delinquency rates starting to rise again, it’s not clear that we’re out of the woods on housing generally. But more household formation is generally correlated with stronger economic footing.

Anyway, it would be good to have a rational, legal, non-fraudulent mortgage lending and servicing architecture in place for this potential boom, no?