"We'll continue to see improvement in existing home sales, as I expect we'll see more inventory this year," said Jed Kolko, chief economist at Trulia. "That could further slow down price gains, but should add to the volume of sales."
The weakest area of recovery is in employment of 25- to 34-year-olds, the millennial generation. It is just 46 percent back to normal levels, although it did see some gains in the latest monthly report from the Bureau of Labor Statistics (BLS). Employment of these young adults was at 76.4 percent in December, up from 75.5 percent a year ago, and the highest in six years, according to the BLS.
"But keep in mind that's only halfway back to normal. Having a job matters for housing," added Kolko, who cites U.S. Census data showing just 12 percent of employed 25- to 34-year-olds live with their parents, versus nearly twice as many unemployed who do.
Single-family housing starts are still struggling, as household formation is almost entirely on the rental side. That is good news for the multifamily apartment sector, but not for the nation's home builders.
Read MoreWill too many apartments pinch the rental market?
Another laggard is loan delinquencies. More than 1 million properties had foreclosure filings in 2014, according to a new report from RealtyTrac. That is the lowest level since 2006, but, again, it's not back to normal. In fact, newly started foreclosures jumped to a 17-month high in December, as lenders got more aggressive in clearing out the backlog of delinquent mortgages.
Read MoreForeclosures down, but will take 2 more years to normalize: CoreLogic
"A recent surge in foreclosure starts and scheduled foreclosure auctions in several states in the last few months of 2014 indicate that lenders are gearing up for a spring cleaning of deferred distress in the first half of 2015 in some local markets," said RealtyTrac Vice President Daren Blomquist in the report.
The pool of distressed loans has not increased, but some states have had significant delays in foreclosure processing, leaving cases open for several years. On the bright side, the housing market is so desperate for lower-priced homes right now that as these properties are repossessed and put up for sale, they should be swept up by buyers relatively quickly.