Acknowledging that these challenges won't be easy, Zandi said his forecast is based on the assumption that Democrats and Republicans will eventually strike a deal on these contentious issues because each side has much to lose. Democrats, he said, don't want to see tax cuts for the wealthiest Americans and Republicans don't like the defense cuts mandated by sequestration.
If the nation has the "political will to address the fiscal issues in a reasonable way, I think we will be off and running," said Zandi.
A Gradual Climb to Normal
Delving into the state statistics behind the national numbers, Robert Denk, NAHB's assistant vice president for forecasting and analysis, cited a range of differences among the states in the amount of pain suffered during the recession and the progress that is being made in recovering.
The hardest hit states -- such as Arizona, Florida, California and Nevada -- bottomed out the furthest during the downturn and still have much ground to make up.
Meanwhile, several energy producing states - North Dakota, Texas, Oklahoma, Montana and Wyoming - will be back to normal levels of housing production by the end of 2014.
On a national basis, housing starts are projected to get back to 55 percent of normal production by the end of next year and 70 percent of normal by the end of 2014, Denk said.