Forecast Calls for Modest Growth in Home Sales for 2015

In keeping with other recently released predictions, the latest housing forecast from market research firm IHS Global Insight calls for modest growth in home sales in 2015 following what's been a disappointing year.

In her outlook, IHS economist Stephanie Karol focuses on two major trends that have shaped the housing market in 2014: low household formation and diverging trends for new versus existing-homes.

According to data from the Census Bureau, the country saw the addition of only 467,000 new households between March 2013 and March 2014, well below the post-recession average of about 600,000 per year.

While formations are expected to disappoint again in 2014, Karol predicts next year will see the addition of 1.08 million new households, with economic growth driving up the rate of new formations—and demand for new housing.

"As a swell in steady employment joins with rising wages, household formation should climb, boosting homeownership rates," she said.

With demand projected to rise, Karol anticipates homebuilders will respond by ramping up housing starts, closing the massive gap between existing single-family inventory and the unsold stock of new homes (which she estimates at nearly 40 to one) and boosting new home sales up to 480,000.

Together, both new and existing-home sales are forecast to rise to 5.34 million annually, the result of improving home equity spurring more homeowners to sell.

"As a result, inventories have expanded—and families, who are no longer being consistently outbid by investors with plenty of cash on hand, have entered the market in sufficient numbers to stabilize median price growth in the 4–5 percent range," Karol said. "Overall, the post bubble-landscape will continue into next year, but with slightly smoother terrain."