Has the national housing recovery been overhyped? Did overexuberance create unrealistic expectations? A slowdown in new homes sales across the country in the last few months has turned some analysts sour on the budding recovery.

In its Housing Chartbook: February 2014, the Wells Fargo Economics Group states that the slowdown should not have been unexpected but there’s no reason for panic.

Surprisingly weak new home sales figures for December and downward revisions to the prior two months have lowered expectations for housing in 2014. Despite diminished expectations, we do not believe the underlying fundamentals of the housing recovery have suddenly taken a turn for the worse. We have long held that the housing recovery would be a long, difficult slog and now that investors appear to be backing away from the market, it has become abundantly clear how modestly the underlying fundamentals have actually improved. Sluggish job and income growth have weighed on household formation and encouraged a larger proportion of households to rent rather than buy a home. We see this trend gradually shifting as the economy moves to firmer ground, but the shift will be gradual and doubts will periodically resurface when bad weather or unsettling political events send chills throughout the economy.

The Group attributes at least a portion of the recent slowdown to bad weather in many areas (not in Las Vegas, though!), which means it may continue until the weather warms in a couple more months.

Despite these reduced expectations, the Economics Group still expects new homes sales to increase 19.4% in 2014 with new single-family housing starts rising 19% in 2014 and 25% in 2015.

The report also predicts a “gradual ramp up” in new home construction over the next few years (see chart below) but states, “We have slightly lowered our forecast for 2014 and 2015 to reflect the lower yearend home sales and new home construction figures.”

In one of the brighter predictions, the report claims, “There is mounting evidence that the 9 year slide in the homeownership rate is nearing an end.”

Recent evidence from Las Vegas reveals a similar trend occurring locally to that described in this report – the market leveled off at the end of the year after being sizzling hot for parts of 2013. The Lied Institute’s quarterly report, scheduled for later this month, should shed more light on the local picture.