Automatic spending cuts, or the sequester, set to begin March 1 would have a seriously negative impact on the housing market, according to CNBC real estate columnist Diana Olick.

The cuts would total $85 billion for the fiscal year ending Sept. 30.

Olick cites Shaun Donovan, secretary of Housing and Urban Development (HUD), who said last week that the sequester would "harm numerous families, individuals and communities across the nation that rely on HUD programs."

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

One housing group that would be hurt is the Federal Housing Administration (FHA), which would likely shed staff, Olick writes. That means the FHA wouldn’t be able to process as many new home loans and mortgage refinancings.

That’s quite a problem given that the FHA backed 23 percent of mortgage originations last year.

Job losses created by the sequester would put a damper on the housing market too. “Borrowers need to be employed to close on their home loan, Craig Strent, CEO of Maryland-based Apex Home Loans, tells Olick.

“As a quality control measure, lenders call a day or two before closing to verify an individual is still employed. If a loan is denied during the process due to the borrower losing their job, they are likely to lose their loan lock as well, so even if the sequester is reversed quickly, this has the potential to upset a lot of homeowners — particularly given that rates have risen in recent weeks,” Strent says.

The spending cuts would obviously hurt defense contractors and their employees in the Washington, D.C., area and that could mean trouble for homebuilders active in that region, such as Toll Brothers and NVR.

In addition, the spending cuts also would mean that 75,000 fewer households would receive foreclosure prevention, pre-purchase, rental or other counseling through HUD grants, the agency says.

“This counseling is crucial for middle class and other families who have been harmed by the housing crisis from which we are still recovering, and are trying to prevent foreclosure, refinance their mortgages, avoid housing scams, and find quality, affordable housing,” Donovan said.

Meanwhile, good news came out for the housing market Wednesday, when the Commerce Department reported that the annualized rate for single-family-home starts hit 613,000 in January, the most since July 2008.

“We ended 2012 on a solid note, and we do have some momentum heading into this year,” Gus Faucher, a senior economist at PNC Financial Services, tells Bloomberg.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.