CNW Predicts Rise in New-Car Sales Relatively Soon as Housing Inventories Correct
BANDON, Ore. — According to Art Spinella, of CNW Research, the downfall in the housing market played a big role in the collapse of new-car sales, and he recently went into further detail about this trend.
Basically, in his latest analysis Spinella explained, "Lower equity translates into an inability to borrow against the house to buy a car. And not surprisingly, the majority of states where home equity loans are used extensively for new-car acquisitions have suffered a larger proportion of sales losses versus 2006."
Continuing on, he indicated that for almost two years it has become apparent that unless housing prices rebound "some states will continue to suffer serious new-car sales deterioration."
The states most impacted include California and Florida.
"It will take a reduction in newly constructed house inventories, which is actually happening in the two most populous states," Spinella stated. "Six months ago, the supply of unsold new houses in California was running in excess of 80 months (according to CNW data).
"Today it is less than 40 months and continues to improve," he continued. "By fall, we anticipate the days' supply of unsold houses will be less than 20 months."
Boiling it down, Spinella said that as a rule of thumb, 45 days for a house to sell in California is the threshold for most sellers.
"That day is coming again. Probably not until the final quarter of this year or the first quarter of next, but in either case a California turnaround will benefit all auto sales in 2009," he highlighted.
Overall, the top 10 states where consumers tend to use home equity:
Bottom 10 states where consumers tend to use equity less often:
Upside Down Housing
Another trend Spinella addressed was upside down housing and the relation to vehicle sales.
"Of those people who purchased a new or existing house, CNW estimates the number who are upside down, or owing more than the home is work, three years later," he explained. "In California, barely more than a quarter of 2003 buyers were upside down during the first quarter of 2006.
"Of those buying a house in 2004, more than half were upside down three years later," Spinella pointed out. "And 68 percent of those who purchased in 2005 owed more than the house was worth in 2008."
According to CNW, Michigan is in a "state-specific recession" with some houses sitting on the market for years before selling. On the other side of the coin is Oregon, which actually saw a decline in sales time compared to the prior year.
"Some parts of the state, Bend for example, have suffered, but Portland continues to have a relatively strong housing market with prices remaining fairly stable and increasing for the right properties," Spinella concluded.
Upside down analysis:
California: Up to 68 percent from 26.7 percent in 2006.
Florida: Up to 71.1 percent from 19.8 percent in 2006.
Michigan: Up to 84.3 percent, compared with 63.7 percent.
New York: Up to 48.6 percent from 21.7 percent.
Colorado: Up to 31.8 percent, compared with 13.1 percent.
Oregon: Up slightly to 19.4 percent from 18.2 percent (only state in CNW's list that improved from first quarter 2007).
For more information, visit www.CNWMR.com.