US Videos

Conditions Building for More Home Sales

Robert Johnson, CFA

The Morningstar Minute is our quick take on investments, the market, economic indicators, and more. Join us every day for fresh insights from our analyst team.

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.