In the wake of the National Association of Home Builders' (NAHB) latest confidence index, builders convened in Las Vegas this week to discuss housing trends over the last few months and what they expect to see in 2015.
In a panel at the group's International Builders' Show, top economists representing housing organizations and businesses projected a healthier year for housing ahead, citing a recovering labor market, low interest rates, and improvements in credit availability for borrowers.
David Crowe, chief economist for NAHB, paid particular attention to the country's gross domestic product (GDP), which he estimated grew at a rate of 4 percent in 2014's second half, and to the employment picture, which strengthened considerably after a slow start to the year.
"The signs point to a more robust year for housing," Crowe said. "Household balance sheets are returning to normal levels, home owners' equity is increasing and significant pent-up demand is rising."
Crowe added that an estimated 7 million existing-home sales were delayed or "lost" during the downturn, at least some of which he expects to come back soon.
David Berson, chief economist at Nationwide Insurance, agreed that demand is in a position to pick up as the recent acceleration in job growth leads to more household formations, a statistic that has been slower to grow in the current economic expansion than it has in the past.
Berson also put a spotlight on millennials, who have so far played a relatively small part in the housing market's comeback. While that group has suffered more than most from stagnant wages and high debt, he's optimistic that they'll enter the market as jobs and the economy continue to grow.
"The leading edge [of millennials] are now in their young 30s," Berson said. "Homeownership desire is much higher for those who are in their 30s than those in their 20s."
In terms of construction, NAHB projects that housing starts totaled 993,000 in 2014, up 6.7 percent from 2013 (in an initial figure released Wednesday, the Commerce Department estimated that starts totaled about 1.01 million in 2013).
For 2015, the group predicts new construction will accelerate, particularly in the single-family market, which is forecast to see 26 percent growth to an annual figure of 804,000 new units.
"While a good beginning, this is still well below a normal level of 1.3 to 1.4 million single-family starts," Crowe said.
Frank Nothaft, chief economist at Freddie Mac, was slightly less optimistic in his own predictions, though he still called for housing starts to rise 15 percent this year over 2014.
For home prices, Nothaft expects a 3.5–4 percent increase over the course of 2015. While rising interest rates are also projected to push home costs up, he maintained that affordability will still be high, given economic trends.
"If we see economic growth running at 3 percent at an annualized, rate, the Federal Reserve should begin to push up short-term interest rates by the second half of 2015," Nothaft said. "We see mortgage rates going up to 4.5 percent on the high side at the end of this year, going from dirt cheap to cheap. Overall, affordability for buyers in most markets will be well maintained in the context of strong job and income growth."