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By Robert Johnson, CFA | 04-24-2014 03:00 PM

Conditions Building for More Home Sales

As the credit and employment environments improve along with stabilized mortgage rates, the housing market should pick up steam starting this year.

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Bob Johnson: The chart today shows both new and existing-home sales. Existing homes are important because they have a lot of carry-on sales for furniture and so forth. It's a much larger component. It's about 10 times larger than new home sales, so certainly it drives them. But more important to GDP calculations, the overall gross domestic product, is new-home sales because every dollar of those sales goes into the calculation.

We put both of these on a graph so that you can see that they both have gone way up and absolutely collapsed. And existing-homes sales have made a halfway decent recovery, recovering about a third of what they lost. And you can barely see on the graph the small improvement we've gotten in new-home sales. Both metrics show a small decline recently, probably weather-related.

As credit conditions improve, as employment continues to move upward, and as mortgage rates begin to stabilize a little bit albeit at higher levels, we think the housing market will begin to pick up a little more steam later this year and into 2015.

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