Great Graphic: US Housing Market--Another Look

These Great Graphics on the US housing market are from the Wall Street Journal's Real Time Economics blog, where Nick Timiraos posted data from the National Association of Realtors. 

In the first half of 2014, existing home sales are about 5% below the H1 2013.  However, they are still above the pace seen in the 2009-2012 period.   

The first chart shows existing home sales in the US at a seasonally adjusted annual rate.  After peaking last July, existing home sales pulled back through Q1, but with the 2.6% gain in June, they rose every month in Q2. Existing home sales reached their highest level since October 2013 at the end of Q2. 

Average 30-year fixed rate mortgages, a financing option known in few countries outside the US, rose by about 100 bp ( or about a 28% increase) between May and July 2013.   Rates have drifted lower through H1 14.   The Fed has acknowledged that the housing market has been a disappointment this year.  It seems to be particularly sensitive to interest rates, which seem to be a more volatile component of affordability than prices.  

There is an important reason not to be too disappointed with the softness in US existing home sales this year.  It seems to reflect an absorption of the distressed market, as the second chart here illustrates.   

This is to say that the continued slowing of foreclosed homes plays a large role in explaining what is happening.  Consider that distressed home sales accounted for 11% of the existing sales in June.  They were 15% of last year's sales, a full quarter of the 2012 sales and almost a third of the 2011 existing home sales.  

Here is another way to think about it:  Distressed home sales were off 40% year-over-year in June. Other, non-distressed existing home sales rose 2.3% from a year ago, which is faster than GDP increased in H1 14.   Distressed home sales tend to weigh on prices.   The gradually improving labor market, the lower interest rates and the firmer house prices may all be helping ease foreclosures, which reduces the supply for distressed sales.  This is turn can lead to higher prices and better housing market activity.