Patrick Stone, the CEO of Williston Financial Group and WFG Title Insurance Company, likes to keep his staff pumped.

And he likes to do it himself, and in person.

Recently, in one of his speeches to colleagues, he made several bold predictions for housing.

Are we stuck in a housing bubble? Nope.

Are recent housing indicators and negative headlines like this one cause for concern? Not really.

In Stone’s world there is a perfect storm of positivity. And here are his 5 bold housing predictions.

1. Demographic shift 

Baby boomers are no longer the largest age group; it is 22-year-olds who now hold that title. There will be more than 4.6 million heads of household in their prime home buying years (millennials between ages 18 to mid-thirties) by the year 2020, Pat noted, and that growth, he said, will fuel “another real estate boom. That makes me very optimistic about the outlook.”

2. Household formation picks up 

Pessimists cite the decline in new households as a major current and future drag on home sales. But differences in the way this statistic is calculated can produce wildly different results, Pat observed, making housing construction data, in his view, a much more reliable indicator. And the trend here is encouraging. Between 2000 and 2006, Pat noted, builders constructed 2.3 million more homes than were needed to meet demand.  

Given that mismatch, “Are we surprised prices went down?” Over the past six years, household formation rates have increased and 150,000 units annually have become obsolete, reducing the housing vacancy rate to 1.9%. That is close to the historic average of 1.7% and approaching the point at which new construction will make sense again. “We still have a little way to go,” Pat acknowledged, but within the next year, he predicts, single family construction activity will begin to pick up and multi-family construction, which has been soaring on strong demand for rental housing, will slow.

3. How high will Interest rates rise?

Mortgage rates are linked closely to the 10-year bond rate. In a “normal” market, without the subsidy provided by Federal Reserve policies aimed at bolstering the housing, Pat noted, 30-year mortgage rates (the 10-year bond rate plus the inflation rate) would be higher than they are currently, but not that much higher – around 5.5%. 

“Do you think we could live with that?” Stone asked his staff. He doesn’t share the fear expressed by some analysts that the Fed’s policies will push inflation and interest rates damagingly higher. “I will retire before inflation becomes a problem and before mortgage rates exceed 6.5%. It isn’t going to happen,” he insisted. 

4. First-time buyers return

First-time buyers have been largely unrepresented in the housing market recovery to date, leading some analysts to suggest that this may be a long-term trend, reflecting a declining interest in home ownership. Pat disagrees. Polls show consistently “no difference in attitudes” toward homeownership, he noted. It’s not a lack of belief in the American Dream, but lack of confidence in their ability to pursue it that has kept first-time buyer son the sidelines, he believes. As confidence levels rise, he predicts, first-time buyers will return to the housing market.

5. Consumer confidence will rock

Distinguishing consumer confidence (which measures near-term views) from consumer sentiment (reflecting long-term expectations), Pat noted that between 2008 and 2009, “confidence crashed,” falling more than 35 points below consumer sentiment. Now, the two measures are “more closely aligned,” he said. When confidence exceeds sentiment, “that’s when people start spending money” – on housing, among other goods. 

Looking at the differing housing forecasts for next year, Pat noted that the Mortgage Bankers Association tends to be unduly pessimistic, while the National Association of Realtors is at the opposite extreme. “We need to be somewhere in between,” he suggested. 

His prediction: The economy will grow by at least 3.5% annually over the next five quarters; consumer confidence will blow past the 95 mark (it hit 95.4 in October – its highest level in 7 years); first-time buyers will return to the market in force, and as they do, home sales will increase from a slow walk to “a sprint”; the housing market will “normalize” and will be “much better” next year. By 2016, Pat predicts, “we’ll be talking about something else.”