During a interview on Tuesday with CNBC, analyst Robert Wetenhall of Royal Bank of Canada Capital Markets (RY) predicted more than one million housing starts in 2013.

Wetenhall is also predicting other upsides to the market which "will beat investor's expectations."

Three primary factors will drive demand including tighter inventory levels, stable pricing environment and low interest rates.

First-time homebuyers will be the key players to propel the housing start market upward.

The sand states – Arizona, California, Florida and Nevada – are expected to show the most strength in the housing industry for the new year. 

"Housing led us into the recovery and it’s going to take us out," Wetenhall stated.

However, the looming fiscal cliff is a factor that could dampen mortgage availability and access to credit for potential homebuyers, effecting consumer confidence.

Potential changes to tax laws will make it more expensive to purchase a home, resulting in a negative effect on the market recovery.

“We’re trying to creates a buyer that says it’s better to own than to rent,” Wetenhall said.

To watch the clip in its entirety click on the video below.