® is offering five predictions for the coming New Year.  Three bode well for the housing market and none are new.  Most in fact could be dubbed the perennial predictions of the recovery.  They are never really wrong but end of the year reality never fully validates, only marks progress toward them.    Starting with one of the negative forecasts and perhaps the one most often wrong, writer Cicely Wedgeworth says:

1.      Mortgage Rates Will Head Back Up

Of course the experts said that in 2013 and 2014 as well, especially 2014, but still we sit, above record lows but blessing our refinanced mortgages and cursing our money markets.  Wedgeworth says that the improving economy will inevitably mean "the honeymoon is over" and we can expect a new paradigm that will balance job growth with higher but still reasonable interest rates as the Federal Reserve keeps its promise to increase the federal funds rate in 2015.  It has remained near zero since December 2008. Chief Economist Jonathan Smoke hedges a bit on nailing down a date for that increase, saying the Fed might wait until early 2016; but odds are the rate, which has only an indirect effect on mortgage interest, will go up in mid-2015 with mortgage rates rising ahead of the Fed move.  "Our forecast for housing assumes the 30-year fixed rate will reach 5% by the end of 2015," Smoke says.  "The one-year adjustable rate will likely rise less if much at all, and accordingly, we are likely to see a shift into more adjustable and hybrid mortgages over fixed."

2.      Millennials Will Set up House

We've heard this one before as well.  Hopefully it pans out this time. says this generation, born between 1981 and 2000 are looking at an improved jobs outlook "and older millennials are planning ahead."  Sixty-five percent of first-time homebuyers are part of this older group, aged 25 to 34 and of those that are buying, 86 percent indicate that they are motivated by a change in family size - i.e. they are marrying and starting families.  

But while more than two-thirds of household growth in the next five years is expected to be driven by millennials they are still facing student loan debt and with tough mortgage guidelines and often limited credit history Smoke expects they will buy in more affordable areas in the Midwest and the South.

3.      Builders Will Break New Ground

Housing starts in 2014 will only be slightly more than a million and a disproportional part of the construction activity was for multifamily units.  Smoke expects the total will improve next year and will feature a lot more single-family activity.  He forecasts a 16 percent increase in starts and that the single-family sector will grow by 21 percent. 

He offers the caveat that shortages of labor and building materials will limit any greater increase in single-family construction, keeping the overall supply tight.  MND reminds readers of CoreLogic's observation this week that some 40,000 foreclosures each month and the overhanging foreclosure inventory of over 600,000 homes is still inhibiting activities of new single-family home builders. 

4.      Credit Will Continue to Be a Major Factor

It isn't fair to call the second pessimistic prediction one that is perennially wrong.  That it continues to be correct is the bad news.  As has been the situation for the last four years strict underwriting rules are keeping consumers, especially younger ones - those millennials discussed above - from getting mortgages.  It is possible that new federal policy initiatives might relieve the situation in 2015 and it not, then it will become clear what is holding back the housing recovery. 

 "If you just look at the distribution of credit scores, at least 10% of current homeowners with mortgages would not qualify for a new mortgage today," Smoke said. He points out that improving credit access "would be a game changer," and estimates such a move would allow 500,000 to 750,000 would-be buyers to become homeowners.

5.      We'll Close Out the Foreclosure Crisis

The article predicts that the coming year will see the end of the nation's seven year-long odyssey of foreclosures and short sales.   Their numbers already dwindled substantially in 2014, but Smoke says that while the end is near nationwide foreclosures will remain a local issue. 

"The situation differs in every market, even every neighborhood," Smoke added. "Each has its own unique, long-term trends in home values, which reflects local demand and supply conditions."