Veteran housing economist David Berson, formerly of Fannie Mae and PMI Group, shares his thoughts on what the public needs to know about the housing market this year. 

First, he predicts that 2014 will be the strongest year for housing activity since prior to the recession. Most economists expect an improved job market in the months ahead, with employment growth accelerating and the jobless rate continuing to fall. This will be the key factor improving housing demand in 2014, even if mortgage rates climb and affordability declines. 

Additionally, demographics should start to favor housing activity. To this end, the demographic factor most affecting the residential property sector is household formation. "Household formations are affected by the job market, as people 'double-up' when worried about their job and income-earning prospects," Berson writes. "The Great Recession and the modest job recovery in the years following induced many people who might have lived independently to move in together." 

Berson and colleagues estimate the economy is short by more than 3 million households. If the economy expands at a faster clip in 2014, bringing a more rapid rate of job creation, that should translate into more households, which in turn should raise housing demand.  

Finally, Berson says mortgage availability should not worsen between now and the end of December and may actually expand.

Source: Housing Wire