The most likely future for New England’s economy — and its housing market — is a slow slog back to normality, economists agreed at a summit held yesterday at the Federal Reserve Bank of Boston.

The forum, sponsored by the Greater Boston Association of Realtors, featured economists Alicia Sasser Modestino of the Fed and Patrick Newport of IHS Global Insight, Eric Belsky, director of Harvard’s Joint Center for Housing Studies  and John P. Brodrick, senior vice president of mortgage banking at Eastern Bank,/

Modestino reviewed the current state of the New England and Massachusetts economy, saying that the regions’ recovery has been fitful over the past year, with slower growth here than in the rest of the nation. However, she said that’s partly because New England had less ground to make up, with the declines in housing and employment far more shallow here than in places like Arizona and Nevada. Massachusetts in particular has fared better than the rest of the region, she said, with unemployment rate dropping to 6.5 percent over the course of the past year, 1 percent better than New England and 1.3 percent better than the national average.

But according to Modestino, the slowdown in the recovery means that it will take several more years for the region to return to the same level of employment it enjoyed before the recession. Unemployment may worsen, she added, before improving as job growth entices people who had stopped seeking work to return to the labor market.

Newport, the director of long-term forecasting for IHS, echoed Modestino’s caution when it came to housing. Though 2012 had been a substantial improvement over a dismal 2011, Newport said, it shouldn’t be forgotten that 2011 was the worst year for housing since the 1940s, and even a 10 to 20 percent improvement in sales still left the market well below par.

"I think we need to wait until 2015 until things resemble normal in the housing market," with home prices rising more than inflation, said Newport.

However, he said, the Fed’s policy of low rates should continue for the foreseeable future, boosting home prices while the market slowly recovers. By next year, he said "we should see home prices rising in every state."

Sustained Price Increase?

Belsky, however, was somewhat more positive on the prospects for a more robust recovery. Though the recovery has been sluggish so far, it is possible for a relatively small improvement in the overall economy to spark a quick acceleration in housing, he said. He pointed to two factors to make his case: The first-time homebuyer’s tax credit in spring 2010 created a mini-boom that quickly drove up house prices, with the promise of $8,000 in credits — less than 5 percent of the median single family home price in Massachusetts — enough to drive a wave of buyers into the market.

That experience suggests, he argued, that a relatively small improvement in the overall economy could spark a similar large revival in demand that would prompt a sustained price increase.

Belsky suggested there’s a still a huge wave of untapped demand out there, since "household formation," the term economists use to describe the number of people moving out on their own, has been well below historical levels for several years.

If it weren’t for people doubling up, about 2 million more households would have been formed across the country over the past several years, providing a substantial boost to demand, Belsky said. 

"My theory is that unless somebody who is living with their adult children — now aging into their twenties and thirties — decide that this is the lifestyle they always wanted, you’re going to see them writing a check that’s going to show in [the kid’s] bank accounts about three months before they buy a house," said Belsky. "There’s enormous pressure to reverse this [doubling up]."

However, Belsky did caution that current underwriting standards were continuing to make it difficult for young people to qualify for loans, driving people into the Federal Housing Administration (FHA).

But prospects for any potential loosening in lending standards looked dismal after the report by Brodrick, who rattled off a range of regulatory challenges at several levels that are keeping banks cautious, including new international banking standards that call upon large banks to retain more capital, new federal rulemaking under Dodd-Frank regarding "qualified residential mortgages" that could drive banks into tighter lending standards, and Massachusetts’s own recently passed foreclosure law, which will impose higher servicing costs on banks that could make them skittish about loosening lending in the Bay State.

Even with all that, however, panelists seemed to agree that the economy and the housing market should stay on a path toward further growth.

"New England is resilient. If we can survive a Pats’ loss to New York in the Super Bowl, a Celts’ loss to Miami and the worst Red Sox season since 1965, then getting the economy restarted should be a walk in the park," joked Modestino.