The economic and housing outlook for 2015 is a positive one, continuing trends seen in 2014.

That’s according to a webinar hosted by the National Association of Homebuilders (NAHB) in which chief economist David Crowe explained the rationale behind builders’ positive outlook.

The NAHB/Wells Fargo Housing Market Index (HMI) had builder confidence for newly built single-family homes at a level of 57. Any number above 50 means more builders view market conditions as positive than negative.

Crowe drew attention to the fact that though month-to-month the construction numbers bounce around, quarterly there is an upward trend.
Crowe pointed out that though construction numbers bounce around month to month, quarterly there’s an upward trend.

Though one point below last month’s HMI of 58, Crowe explains the outlook is still a positive one.

“The builders are telling us that in their sentiments,” he said. “The most recent number is at 57 – one point off the November level – but I don’t see it as a negative indicator. If you average the last six months, it’s at 56. I continue to be optimistic that we’re going forward — though at a more modest pace.”

Crowe spoke to some areas which affect the economy and therefore housing, including the current employment numbers. While not quite “where we need to be,” Crowe says, “the economy has seen some nice, strong moves in employment. We are much more consistent in our growth. We added 7.2 million since the slump, and the total number of people working is higher than it’s ever been.”

Crowe also hit on interest rates, which play a significant role in the health of the housing market.

“Interest rates have played a part in this recovery,” Crowe says. “We’ve had a backwards fall [to four percent]. I do think that’s going to have to go up again. As the economy grows, we’ll have demands in capital from other sectors.” But as for the rate’s upward trajectory, he’s forecasted it won’t rise quite as fast as it had before.

“The level of interest rates isn’t so much an issue as the availability of interest rates,” but Freddie Mac has eased availability in recent weeks, Crowe noted.

Lastly, he addressed the millennial generation—particularly its wage growth and how that will affect housing. He said that new homebuyers in the 24-34 age range are seeing positive movement in income.

“That should give them a boost,” he said. “From 2004-2013, virtually every age group’s net worth declined, but in 2014, that’s beginning to reverse itself. From 2010 to 2014, we’re seeing some net worth growth – particularly in the younger age groups,” which will help them gain confidence to purchase homes.

As for the rest of the HMI, two of the three components posted slight losses in December. The index gauging current sales conditions fell one point to 61, while the index measuring expectations for future sales dropped a single point to 65 and the index gauging traffic of prospective buyers held steady at 45.

Looking at the three-month moving averages for regional HMI scores, the West rose by four points to 62 and the Northeast edged up one point to 45, while the Midwest registered a three-point loss to 54 and the South dropped two points to 60.

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