Finally, Trulia predicts that rental demand will shift from single-family rentals to urban rentals. With investor activity slowing, coupled with the fact that fewer homes are going into foreclosure, the supply of single-family rentals should cool. Meanwhile, young adults who move out of their parents homes to form new households are more likely to choose urban, apartment-style rentals and multi-family construction is much higher.
"The shift in rental activity from suburban single-family to urban apartments would be yet another sign of housing recovery," noted Kolko. That would mean that household formation, which is still well below its pre-bubble normal, is recovering. Household formation is one of the biggest underlying drivers of housing demand.
Trulia also released its top 10 markets to watch, with Bethesda- Rockville- Frederick, MD, Charlotte NC-SC and Denver, CO topping the list.
Read what Zillow has to say about the 2014 market for housing.
-- Written by Shanthi Bharatwaj in New York.