After a slow 2014, the housing market should be looking up next year, Freddie Mac’s Chief Economist Frank Nothaft told attendees at the New England Mortgage Banking Conference in Newport, R.I.

According to Nothaft, 2015 should be the best year for home sales since 2007, with buyer affordability remaining strong in most metro areas around the country and overall home prices expected to rise about 3 percent. However, Freddie believes that interest rates will also slowly tick up in 2015, hitting 5 percent by year end. That will continue to choke the refi market, with the number of refis continuing to decline next year from today’s already low levels.

The New England market may also underperform relative to the rest of the country, however, at least in the more expensive metros. While places like Worcester should remain affordable even if rates do rise to Freddie’s expectations, other areas may see slower sales as prices rise and less cheap inventory comes onto the market as REO and short sales continue to decline.

"Here in New England, short sales have dropped 20 percent … if you look at non-distressed sales, that number hasn’t changed. In my mind, [recent sales declines] have been driven entirely by the decline in distressed sales," Nothaft said.

A stronger economy next year should help increase homebuyer activity and overall household formation, leading to an improved housing market. However, high levels of student debt could continue to exert a drag on the market, particularly for the Millennial generation, said Nothaft. It’s important to remember, he noted, that while average levels of student are high, it’s not evenly distributed – the majority of students with debt have less than $15,000 in debt, he said, while a smaller portion have levels over $100,000.

Millennials may wait longer to purchase, he said, "but they still have that same desire to own a home that their parents did," Nothaft said.