Last year’s recovery in America’s housing market bodes well for further growth over the next two years. However, that growth could be affected by any number of economic and political events whose outcomes remain uncertain.

That was the message conveyed at the International Builders' Show in Las Vegas on Tuesday by three leading housing economists: NAHB’s David Crowe, Freddie Mac’s Frank Nothaft, and Nationwide Insurance’s David Berson.

Crowe led off the "Housing & Economic Outlook" by noting that 2012 was “a pretty good year, a decent year” for housing. Single-family starts were up 23% to 535,000 units; multifamily starts—driven by demand for rental—rose 38% to 236,000.

As important were steady increases in new-home prices, which through the first 10 months of the year were up nationally by an annualized rate of 5.8%, versus the negative 3.3% rate seen over the same period a year earlier. And housing again is contributing positively to GDP growth.

Crowe was quick to point out, however, that the housing market is still well below peak levels. Four of the nation’s biggest housing markets—California, Arizona, Florida, and Georgia, which accounted for 32% of all home starts during the housing peak—accounted for 19% of starts in 2011, and are expected to account for 25% by 2014.

The national average of single-family starts in the fourth quarter of 2013 will only be 52% of “normal,” in Crowe’s estimation, and 70% by the fourth quarter of 2014.

Crowe sees “dangers” to housing’s full recovery in such factors as the dwindling availability of developable lots, rising material costs (the No. 1 concern among builders polled about business conditions in 2013), labor shortages, and broader economic issues such as the country’s debt, tax reform, and what the future bodes for the secondary mortgage market. 

While he believes the country is “moving in the right direction” in housing formation, much of that formation is coming from the rental sector.

The good news is that far fewer builders are resorting to discounting or incentives to sell homes. The number of markets that NAHB deems “improving” is now up to 242 in 48 states, from 76 in January 2012.

NAHB projects that single-family housing starts will increase to 650,000 units in 2013, and to 844,000 in 2014. Multifamily starts in those two years are projected to increase to 299,000 and 317,000, respectively.

Freddie Mac’s Nothaft focused his comments about the housing market’s recovery on three areas: mortgage rates, housing prices, and mortgage delinquencies.

Mortgage rates, which are at a 65-year low, continue to drive affordability and sales, he said. And he expects those rates to remain below 4% this year. However, fears about the stability of the employment sector continue to hold back consumer confidence and, consequently, sales of new and existing homes, which Nothaft expects to rise by 8% in 2013.

One of the metrics he’s paying close attention to is the supply of vacant homes, which at around 400,000 units is currently at a 10-year low for both for-rent and for-sale housing. This dwindling supply is driving up home prices; between September 2011 and September 2012, home prices were up by 4% and had risen in 42 states. However, the vacancy drop is also driving rental demand, and that’s causing rents to rise, too. (Apartment values are up about 8% from the past year.)

Nothaft thinks builders’ concerns about a “shadow inventory” of distressed homes cascading back onto the market and diluting home prices “are a bit overblown.” The number of homes in foreclosure or more than 90 days delinquent is still high—3.3 million units, according to Freddie Mac—but is down significantly from 5 million in the third quarter of 2009. And the share of bank-owned properties, or REOs, is now at its lowest level since December 2007.

The panel’s third economist, Berson from Nationwide Insurance, called out—and in some cases debunked—some of the potential risks to housing’s full recovery. Most of these, he noted, are macroeconomic and political, such as how Washington ultimately deals with the deficit, rising debt, and new lending rules. He didn’t think any single action would be enough to push the country back into recession, even if it caused the monthly job creation rate to fall below 100,000. However, he was quick to note that “the job market [remains] the most important thing” affecting housing.

As for builders’ capacity to finance growth, Berson didn't expect banks to ease their tightening lending policies until some risk is allowed back into the system. “The right number isn’t zero, and that’s where we are right now.”

On the positive side, Berson pointed out that job growth has been on the plus side in most states, although “we need to get that up to 250,000 per month.” Home price increases are widespread west of the Mississippi. And the country’s population growth is accelerating. “The thing that drives housing is demographics,” Berson reminded his audience. “And the underlying demand for housing is rising almost everywhere.”

John Caulfield is senior editor for Builder magazine.