Existing home sales plunged 10.5 percent in November, the sharpest decline in five years. Despite this drop, the U.S. housing market is expected to improve in 2016.
BMO Private Bank Chief Investment Officer Jack Ablin tells CNBC's "Power Lunch" on Tuesday, he sees a lot of bright spots in housing.
"The supply of unsold homes will keep a lid on price appreciation. While housing prices have rallied back on a national level, they remain 13 percent below peak levels," Ablin said.
He is also starting to see millennials getting into housing. "Household formations are picking up. That's a good sign for new home demand. Real estate lending is on the rise after years of decline," Ablin said.
According to research at BMO Private Bank, new home construction over the past two years have coincided with an uptick in household formations.