The panel of economists was composed of David Crowe, the chief economist for the National Association of Home Builders (NAHB), David Berson, senior vice president and chief economist at Nationwide Insurance, and Frank Nothaft, chief economist and vice president at Freddie Mac.
During the hour-long discussion, all three experts agreed that housing start growth would accelerate in the next year, but they didn't necessarily agree on how fast housing starts would grow, or which economic conditions would best contribute to that growth.
"Single family housing starts will increase 26 percent to 800,000 a year," said Crowe. "That is still well below a normal level of about 1.3 or 1.4m starts," he added. "While it’s a good year, it still leaves us a good distance away from where we need to be."
Nothaft's growth forecast of 15 percent wasn't as optimistic. But he added, "if [that much growth] comes to pass, that will be the best year for home sales since 2007." Nothaft also predicted a modest rise in home prices. "We’re expecting house prices to continue to rise in 2015 at 3.5-4 percent rise in values in 2015," he said.
"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," added Nothaft. "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."
Berson said there were three main challenges holding the housing market back right now: Lending standards, lack of household formation, and student debt. "The question is, why haven’t household formations picked up?" asked Berson. "It may be that the real acceleration in job growth has occurred too recently."
As we hear more and more these days, the solution may come down to the purchasing power of the millennial generation. And the older they get, the more likely they are to earn higher wages and be free from student debt. "The leading edge are now in their young 30s," said Berson. "Homeownership desire is much higher for those who are in their 30s than those in their 20s." As the economy gains steam in 2015, Berson predicts it will be a "significant factor" in encouraging millennial household formation.