CHICAGO (MarketWatch) -- Luxury home builder Toll Brothers said Wednesday that the housing market remains weak in most areas, and Chief Executive Robert Toll said, given current poor traffic through subdivisions and a dearth of deposits on new sales, "we are not yet seeing much light at the end of the tunnel." Read the full story.

It's not just that it is winter and home building hits a big seasonal slump this time of year, regardless of market conditions. The problem for Toll Brothers TOL, -4.51% and all the other home builders is that the first signs of recovery in the housing market aren't going to be spotted in their industry.

For the most part, folks who buy newly constructed single-family houses are move-up buyers who already own a house and are looking to buy a bigger and better model, either because their family has grown and they need it or because their income has increased and they feel they deserve it.

But if buyers cannot sell the home they are in, they won't be building the homes of their dreams. With the existing-home market slumping in many parts of the country, sellers have little guarantee they can unload their current house at a price that will let them afford their move-up accommodations -- if they can sell at all.

That's one of the reasons why home builders are seeing so many cancellations: New-home buyers who signed contracts expecting to trade in their existing homes are forced to back out when their listings languish.

Catering to first-time buyers is not a great alternative under current conditions, either, because tight mortgage underwriting standards have made it much more difficult to get into a house with little down payment or with a credit history that has even a smidge of trouble.

Where will the harbingers of a housing rebound first surface? In the existing-home market. Until we see those sales start to creep up and, more importantly, the inventory of houses on the market declines, we're not likely to see any significant upturn in new construction.

Watch prices, too. They will have to show some stability before buyers will venture in force into either the existing-home or new-home market. The fact that home builders have to cut prices to move inventory has an especially dampening effect on new-home sales, where buyers are loath to purchase a house in a subdivision where the builder may be offering big discounts on the same model a month or two -- and just a street or two -- down the road.

The thing is, right now, if you look down any other housing tunnel than the one the home builders are staring at, you still can't find a light. None of the train wrecks has been cleared.

- Steve Kerch, assistant managing editor/personal finance