Chief Economist Jonathan Smoke talks home prices, home sales, credit boxes and more in this exclusive HousingWire interview that hints at what his 2015 forecasts may hold.

HousingWire: Are we looking at a coming "quiet time" for housing in 2015, in the sense of the pendulum no longer swinging one way or another, but rather returning to more sustainable, stable levels of home price growth and sales? 

Jonathan Smoke: We are clearly moderating to home price appreciation levels much more consistent with long-term annual gains. Over the past 10 years, we lived through macro, financial anomalies that caused the pendulum to swing uncharacteristically up and then down. As the pendulum moved down, it over-corrected in 2010-2011 leaving us with abnormal swings back up in 2012-2013. This year, and next year especially, will end up looking much more in-line with equilibrium, which is another way of saying that price movements are “normal” and make economic sense. But, remember that housing is a local issue. Every market, every city, every neighborhood has its own unique, natural, long-term trends in home values, reflective of local demand and supply conditions. The performance of any specific property relates to that trend but is also reflective of the unique characteristics of that specific home, the time of the year, and the individual buyer and seller motivations. That's why setting and negotiating prices involves the qualitative and complex analysis of recent comparable sales, and more people than ever intend to use a Realtor to make the best possible decisions. 

On the sales side, we are not back to normal. And the lack of normal activity for six years and counting means that we have substantial pent-up demand waiting for all of the catalysts to enable that activity. That means we can look forward to several years of solid growth in sales of existing and new home sales.

HW: Is the housing market stabilizing despite the imbalance of lower participation by first-time homebuyers than is historically normal? 

Smoke: Values are stabilizing but volumes, and the transactional flow in the overall housing ecosystem, are not normal. It's similar to a stock market bubble and correction. Homes were overvalued for a time, then corrected, and then over-corrected. Valuations (of homes) now look more appropriate and in balance at this point, but we’re not yet seeing the trading volumes we would normally expect and that's because many potential market participants have been shut out. As more participants are enabled, trading volumes will go up and then we will be able to say that the whole housing market is back in equilibrium.

HW: Will the moves to open the credit boxes, lower down payment requirements, etc., change the outlook going forward, since we may have more of that pent-up first-time homebuyer demand unleashed?

Smoke: Those changes are critical to enabling all market participants. Plus, some would-be buyers have been held back by sub-par economic conditions, and with the economy solidly on track for more jobs, higher incomes, and more household formations, we will see the first wave of pent-up demand causing transaction volumes to grow. The big questions is - when will we actually see the credit box open up?  As Elvis sang, “A little less conversation and a little more action, please.”

HW: It seems like overall, much of the year a lot of the activity was in the higher-priced home segments. Are those buckets skewing the median price ranges, or masking decreased activity in the lower-priced buckets?  

Smoke:  The distribution of sales can have an impact on price metrics, but where as shift to higher-priced volumes have had the greatest impact is on the new home side. When you look at new home sales, what has been sold over the last two years is an entirely different composition of homes than the years prior.  That’s the real reason why new home prices look like they’ve jumped so much.

HW: What am I not asking that you think I should here – What's the big story for housing for the first part of 2015?

Smoke: Credit access is the key catalyst for early 2015. Limited credit availability through the overlays being added to mortgage qualification standards have not only limited demand, they have also limited supply. Looking at the distribution of credit scores alone, at least 10% of existing homeowners with mortgages now would not qualify for a new mortgage today. If Ben Bernanke couldn't qualify for a refinance, what does that say about his ability— and the ability of others — to sell an existing home and buy a new one?

The more predictable trends — job growth, income growth, and household formation — mean more demand ahead even if we see no movement in the credit box or lower down payment programs. But if those programs do open more access, we could approach double-digit gains in transactions in 2015.