Sluggish home loan data suggest another interest rate cut could be needed to encourage more buyers into the market.
Official data released on Monday showed that housing finance commitments rose just 0.1 per cent in October, less than the expected rise of three per cent in the month.
JP Morgan economist Tom Kennedy said the data suggested the Reserve Bank of Australia may need to cut the cash rate further in order to stimulate growth in the housing sector.
The RBA is counting on sectors like housing to improve in 2013, following an expected peak in mining investment.
"The data today just reaffirms that there are numerous headwinds out there," he said.
"That's another reason that really supports further rate cuts."
The RBA cut the cash rate to three per cent at its December board meeting last week.
Macquarie chief economist Richard Gibbs said weakness in the number of home loans suggested a continued lack of confidence among potential homeowners.
"This data is a lot more spotty than we had expected," he said.
"While the value of lending commitments is up, the number of loans remains weak, reflecting a wider lack of consumer confidence in Australia."
However, optimism seemed higher among property investors, with the value of investment home loans rising 14 per cent over September and October - the strongest back-to-back gains in more than five years.
CommSec chief economist Craig James said there were a number of factors boosting investor confidence.
"Investors conclude that migration is rising, rental markets are tight and home prices are rising - a compelling mix of factors pointing to higher property returns," he said.
Housing Industry Association chief economist Harley Dale said there had been some improvement in total housing finance over the last three months, but without another rate cut, the market could take longer to stabilise.
"Some signs of recovery are better than none and that is what the housing finance figures are showing," he said.
"A pull-back in loans for construction over the October 2012 quarter is clearly an area for concern, however, as is the decline in new home lending in a majority of state and territories.
"The bottom line is that across finance and the full suite of leading housing indicators, there would normally be clearer signs of a new home building recovery by now given where interest rates are set."