The housing market will continue its gradual recovery and gain momentum in 2015 after a disappointing 2014, according to the Wells Fargo Economics Group 2015 Economic Outlook entitled "A Whole New Ballgame," released earlier this week.
Wells Fargo cited a number of reasons in the report for its optimistic housing market predictions for next year, namely easing of credit, job and income growth, and mortgage rates near their lowest levels in a generation. The economists predict existing home sales, which dropped by 3.8 percent for the first 10 months of 2014, will grow by 4.1 percent in 2015.
Single-family starts, which grew by just 6 percent (655,000 units) in 2014 due to a weak job market, slow household formation, tight lending standards, and a backlog of troubled mortgages going through the foreclosure process, are expected to make a comeback in 2015, according to Wells Fargo. Economists expect the percentage of single-family starts to more than double next year, up to 13.7 percent.
Two major factors in the turnaround in homeownership have been the rise in foreclosures and with the earlier decline in home prices, according to Wells Fargo. The homeownership rate, which peaked 10 years ago, has fallen 4.8 percentage points down to 64.4 percent, the lowest rate for homeownership in 19 years.
"We would expect this series to overcorrect because of tight mortgage credit, changing attitudes towards homeownership and household finances continue to be repaired," the report said.
Foreclosures peaked about four years ago, resulting in large numbers of investors purchasing many homes at low prices in major metropolitan areas. The foreclosure crisis is mostly over, having decreased significantly in the last three years since their peak, but the numbers are still above long-run norms, according to Wells Fargo. Foreclosure numbers remain high particularly in judicial foreclosure states, such as Florida, New Jersey, Maryland, and Illinois, where the foreclosure process must pass through the courts.